Ukraine hryvnia plunges 13% in a week to 15.2/USD

Ukraine’s hryvnia plunged to UAH 15.2/USDon Nov. 7, a 13% decline since Nov. 5, when the National Bank of Ukraine (NBU) reduced its interventions at the ForEx and allowed further weakening. Ukraine’s national currency has already lost nearly 46% of its value this year, falling from UAH 8.1/USD.

In a television interview made public on Nov. 9, NBU Head Valeriia Gontareva expressed her hope that the hrvyvnia will move closer to its equilibrium rate of about UAH 12.5-13.0 per USD in the future.

Alexander Paraschiy: Disregarding improved external accounts, the new wave of hryvnia devaluation was inevitable afterthe NBU regulated the exchange ratefor more than a month. Market players understoodthat the propped up exchange rateof nearly UAH 13/USD was artificial, delayed demand for foreign currency was accumulating, and the authorities would allow more devaluation after the parliamentary elections.

Though we do not have a clear signal from the NBU of what we should expect next at the ForEx, we are more inclined to see its latest maneuver as an attempt to “blow off steam.” Fundamentally, the hryvnia does not need further devaluation (considering improving external trade). But in the face of poor confidence in the NBU, the ForEx faces a foreign currencydeficirt as exporters continue to wire their revenue to Ukraine for as long as they can.