NBU reserves virtually even in August

The National Bank of Ukraine’s gross international reserves remained virtually flat at USD 30 bln in August (-5.6% YTD), according to the NBU yesterday. The NBU purchased net USD 436 mln from the market last month.

Vitaliy Vavryshchuk: The fact that reserves stayed almost unchanged in August is extremely positive given that the NBU paid almost USD 1 bln in principal and interest to the IMF last month. This stats should ease depreciation expectations (which heated up considerably in recent days) and support the notion that the NBU will be able to keep the hryvnya relatively stable vs. the US dollar until the end of October when the election cycle ends. We still expect it will be increasingly difficult and costly for the central bank to maintain hryvnya stability thereafter and expect the NBU will choose to let the hryvnya weaken. We project an end-2012 exchange rate of UAH 8.4-8.6/USD and do not rule out that the hryvnya might depreciate further to about UAH 9.5/USD in 2013.