The National Bank explains the exchange rate swings
The hryvnia exchange rate is moving sharply because large sums are being transferred abroad and substantial VAT refunds are paid out at the end of the month.
The swings we have been seeing for more than a week have several causes, including:
- Private companies are repatriating large amounts of profit (they bought around USD 300 million at the start of July), and non-residents are selling their domestic government bonds (OVDP): since the first days of July, the volume of these bonds held by legal entities has fallen by almost USD 48 million. Large VAT refunds at the end of the month noticeably reduce the supply of foreign currency on the market. Demand for cash has also risen, particularly from the agricultural sector as the season gets under way.
- To smooth out the swings, the National Bank of Ukraine (NBU) intervened on the market several times, selling almost USD 150 million last week. The NBU also announced an auction to sell USD 50 million and received bids totalling USD 46.7 million. In the end, the National Bank sold USD 28.1 million at UAH 26.86 per US dollar.
Last month the National Bank sold USD 163 million on the currency market. Net sales came to around USD 64 million, because the NBU had bought almost USD 100 million at the start of the month.
The National Bank continues to monitor the currency market and stands ready to smooth out excessive exchange rate swings with further interventions if needed.
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