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Speculators and exporters strengthen the hryvnia, and tourism gets in the way: when the dollar falls below 27 UAH

The first half of June in the foreign exchange market was characterized by a more rapid than expected strengthening of the hryvnia. So, on the 9th, the dollar rate fell to almost an annual minimum—to 27.17 UAH. In general, since the beginning of the month, the national currency has strengthened by 36 kopecks.

About why the hryvnia is rapidly strengthening, what will be the exchange rate of the dollar, euro, and ruble in Ukraine in the second half of June, about the impact factors, as well as advice on buying currency—in The Page’s article.

Why the dollar is falling and what will have an impact on it in June

Now the revaluation trend in the foreign exchange market has intensified. For instance, the supply of foreign currency exceeds demand, and the buyers have firmly secured their advantage in the market, explains Evgeniya Akhtyrko, an analyst at the investment company Concorde Capital.

"The strengthening of the exchange rate was so rapid that last week, for the first time since March, the National Bank appeared on the interbank market to buy out the excessive supply of foreign currency in order to slow down the revaluation."

Evgeniya Akhtyrko

Evgeniya Akhtyrko

analyst at the investment company Concorde Capital

She predicts that the revaluation trend may intensify by the end of the month if non-resident investors resume buying hryvnia government bonds, and that will not only increase the supply of foreign exchange on the market, but also improve the expectations of its participants.

Yurii Netesanyi, managing partner at the company Atlant Finance, agrees with Akhtyrko. He calls the prevalence of foreign exchange supply over demand in the interbank foreign exchange market the main reason for the strengthening of the hryvnia. He explains that exporters are actively selling foreign currency, which is facilitated by high world prices for Ukrainian export goods (grain, sunflower, ore, and metals). According to him, they are in a hurry to sell it now, while the rate has not dropped even lower, and buyers expect an even greater strengthening of the hryvnia, and that strengthens the revaluation.

However, this is not the only reason for the strengthening of the national currency. For instance, in June the following factors will "help" it:

  • non-residents who renew their interest in hryvnia government bonds and slowly continue to build up their portfolio of Ukrainian securities. To buy bonds denominated in the Ukrainian hryvnia, foreign investors sell foreign currency on the interbank market and buy government bonds, and that also puts additional pressure on the exchange rate. And the demand for government bonds is fueled by the Ministry of Finance that increases the rate of return on bonds;
  • population that continues to sell currency. In May, the difference between selling and buying was $342 million, and in April it was even greater—$546 million.

However, according to Netesanyi, there are negative factors for the hryvnia on the market. The point is that almost every day the regulator enters the interbank foreign exchange market with the purchase of foreign currency. And if at the price of 27.3 UAH the regulator did it to "remind about itself", then closer to 27 UAH the purchase volumes began to increase. "Significant exchange rate fluctuations are unprofitable for the regulator, so we should expect further active buying of foreign currency by the NBU," he says.

Among the downsides, Netesanyi also notes the beginning of the tourist season and a significant deferred demand for overseas vacations on the part of Ukrainians, and that forces travel companies to increase the purchase of foreign currency.

Sergiy Fursa, a specialist at Dragon Capital Debt Securities Sales Department, previously noted in the commentary to The Page that no surprises related to the hryvnia exchange rate against the dollar should be expected in June. He believes that the currency will remain at the same level as now, with possible minimal fluctuations.

Dollar exchange rate forecast until the end of June 2021

Akhtyrko predicts the rate at the level of 27—27.2 UAH per dollar. Netesanyi is more optimistic, arguing that the hryvnia may strengthen to less than 27 UAH per dollar. For instance, for most of the month he expects the hryvnia exchange rate against the dollar in the range of 26.9 — 27.1 UAH.

«However, given that the hryvnia is a fairly liquid currency, we should expect that within a month the quotes will leave the limits of this range and move into a wider, but short-term corridor—26.8—27.2 UAH per dollar».

Yurii Netesanyi

Yurii Netesanyi

Partner at Atlant Finance

Euro and ruble exchange rate in Ukraine until the end of June 2021

The euro exchange rate will traditionally depend on the situation in the international currency market and the euro/dollar quotes on it. Netesanyi explains that now the European currency is worth $1.22 on the world foreign exchange market, and this is almost a peak value, in respect of which a correction can be expected. He predicts that the euro exchange rate on world markets in a narrow range will be at the level of $1.196—1.221, and in a broader range—$ 1.19—1.23 per euro. Accordingly, the hryvnia in a narrow range will be 32.5—33.5, and in a wide range—32.0—33.0 UAH per euro.

As for the ruble, among economic factors that will have an impact on the exchange are oil and gas prices on world markets.

Quote"During the month, we expect the Russian ruble to be in the range of 0.37—0.38 UAH per ruble," the expert says.

Buying dollar in June 2021

Analyst of the investment company Concorde Capital Evgeniya Akhtyrko previously explained that the strengthening of the exchange rate would last for some time, so buying dollars for short-term savings may be unprofitable. And Netesanyi claims that the optimal rate for buying could be a level around 27 UAH per dollar and below. Of the above-mentioned currencies, according to him, the most expedient is the purchase of the dollar.

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