28 August 2014
Ukraine’s national currency, the hryvnia, strengthened after National Bank of Ukraine (NBU) Head Valeriia Gontareva gathered 40 representatives of Ukraine’s largest financial institutions to discuss stabilizing the situation on the ForEx market, the NBU website reported. Before the meeting, the hryvnia extended its fall of several weeks and approached the UAH 15/USD exchange rate, which has been the next looming psychological ceiling for the prior two days.
During the meeting, the bankers agreed that the current justified exchange rate is in the range of 12.5–13.0 UAH/USD and voiced their expectation that this level would be reached in a few days, the NBU website said. Gontareva assured them the NBU will use more administrative measures to calm down the market, including tightening the limits of the foreign currency positions of banks. As a result of the meeting, the hryvnia strengthened sharply to UAH 13.5/USD from an all-time low of 14.9 UAH/USD by the end of the day.
Alexander Paraschiy: We draw two main conclusions from this episode. The recent hryvnia volatility contains a significant speculative component, otherwise such a sudden exchange rate correction would not have been possible. Secondly, the NBU head most likely has promised something to the bankers (or merely threatened them), making them very sensitive to the requests of the monetary authorities.
Indeed this was the first time in recent history that we observed the hryvnia strengthening that sharply after a single meeting between the NBU and bankers. This episode again proves our view that for the moment, the hryvnia is undervalued due to the war in the east and the resulting nervousness in society. We anticipate the USD 1.4 bln wire from the IMF will add confidence to the ForEx market in early September.