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Currency forecast for November: Situation with exchange rate is unstable, and NBU prepares methodology update

Forecast of the dollar exchange rate in Ukraine in November. Photo: NBU

Forecast of the dollar exchange rate in Ukraine in November. Photo: NBU

The hryvnia this fall is notable for its unpredictability. Therefore, it is difficult to predict the value of the dollar and other currencies in Ukraine in November. With the help of experts, The Page tries to do this, as well as to understand what factors will affect the hryvnia exchange rate.

Contrary to seasonal trends, the national currency continued to strengthen in October and set a price record of the year—26.2 UAH per dollar.

According to the Chairperson of the NBU Council Bohdan Danylyshyn, this was facilitated by the prevalence of the foreign currency supply from the banks' clients over the demand (on average by $34 million per day). In order to prevent the rapid strengthening of the hryvnia, the National Bank bought $350 million on the interbank market last week. In general, since the beginning of October, the net purchase of foreign currency by the National Bank amounted to about $700 million, from the beginning of the year—almost $2.2 billion.

At the end of October, the NBU:

  • retained the discount rate at 8.5%;
  • submitted an updated methodology for calculating the hryvnia exchange rate for public discussion.

On the world markets, data on a significant slowdown in economic growth in the US in recent days led to the dollar weakening, but today, on October 29, the dollar has begun to regain its decline in the bidding process.

Exchange rate dynamics

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Hryvnia exchange rate forecast in November 2021

Experts are confident that the strengthening of the hryvnia is a short-term trend. Andriy Dubas, the President of the Association of the Banks of Ukraine, predicts the formation of a devaluation trend by the end of this year. At the same time, in the first half of November, the dollar exchange rate is expected to be in the range of 26.0—26.1 UAH.

According to Yurii Netesanyi, the Managing Partner at the company Atlant Finance, the dollar on the interbank market will begin to rise in early November and during the month it will be in the range of 26.3—26.8 UAH.

Both external and internal factors will impact the exchange rate of the Ukrainian currency in November.

The imbalance between exports and imports will facilitate the strengthening of the hryvnia. The hryvnia receives strong support from the exporters. High world prices for agricultural and metallurgical products, as well as the need to complete the harvest and sow winter crops, stimulate agricultural and metallurgical companies to sell a lot of foreign currency on the interbank market. At the same time, the importers of consumer goods are reluctant to buy foreign currency and import due to fears of epidemic trade restrictions and falling demand from the population.

The population buys foreign currency, but in small amounts. For instance, since the beginning of the month, the net purchase of foreign currency in cash by the population amounted to $55 million, and its net sale in non-cash form—$18 million.

The weakening of the hryvnia may be caused by an increase in demand for foreign exchange from energy importers due to the price rise on international exchanges and a decrease in stocks during the heating season. The situation with coal reserves for thermal power plants in Ukraine is close to catastrophic: there is very little coal, and it is highly likely that it will have to be imported at any price.

One should also take into account the seasonal factor—increased spending from the state budget, Netesanyi explains. He notes that traditionally November and part of December account for at least 25% of all budget expenditures for the year. Therefore, there are two possible scenarios:

  • the weakening of the hryvnia will be facilitated by the situation when there is enough money in the accounts of the State Treasury to fulfill obligations. In this case, there is an excess of the hryvnia, it enters the foreign exchange market and thereby increases the demand for the currency;
  • if the hryvnia is not enough, the Ministry of Finance will raise the rates on government bonds that are becoming interesting for the external investors, and they sell the currency to buy the hryvnia government bonds. In this case, the foreign currency supply on the interbank market exceeds the demand, and the hryvnia becomes stronger.

Another factor that can impact the exchange rate is the situation around the National Bank, Andriy Dubas points out. "The media write about the possible change of the NBU Governor. Kyrylo Shevchenko was appointed Governor of the NBU only in July last year. According to the law, the term for the appointment of the Governor of this regulatory body is set at seven years, and this is no coincidence. Uncertainty always creates fluctuations in the interbank foreign exchange market," he explains.

Euro and ruble exchange rate forecast in November

The exchange rate of the European currency will largely depend on events in the global financial market. According to Netesaniy's forecasts, during November the euro will be in a wide range—$1.15—1.17 and in a narrow range—$ 1.155—1.165. In relation to the hryvnia, the euro is forecasted in a narrow corridor—30.2—31.2 UAH.

The Russian ruble should be expected in the range of 0.375—0.385 ГФР. This will be facilitated by high energy prices and an increase in the RF quota for oil production in the OPEC+ format.

When is it worth buying currency

The experts keep devaluation sentiments and expect the national currency to weaken. The IMF, NBU, and investment banks also expect weakening of the hryvnia; the draft state budget- 2022 assumes 28.6 UAH per dollar. "But now, in the wake of low demand from buyers, it is difficult to expect such a reversal. I would advise Ukrainians to use only those funds to buy currency that they are not going to use in the coming months," Andriy Shevchyshyn, Head of Analytical Department at Forex Club, believes.

Yurii Netesanyi recommends buying the dollar at a rate lower than 26.5 UAH per dollar and the euro at a rate lower than 30.0 UAH.

Situation in the world currency markets

The dollar strengthened against the euro on Friday, October 29, after a significant decline on the eve amid the weak data on the US GDP.

The euro fell to $1.1672 against the dollar, compared to $1.1684 at the closure of the previous session. The day before, the European currency rose 0.7% against the dollar, Interfax reports.

Data on a significant slowdown in economic growth in the United States made investors doubt that the Federal Reserve System (FRS) will decide in November to start curtailing the asset repurchase program.

The European Central Bank (ECB) did not change the volume of the anti-crisis program for the repurchase of assets on October 28, retaining it at the level of 1.85 trillion euros.

The dollar against the yen is 113.61 yen compared to 113.58 yen the day before.

The ICE index that monitors the dollar against six currencies (euro, Swiss franc, yen, Canadian dollar, pound sterling, and Swedish krona), increased by 0.1% during trading on October 29, in the morning.

Dynamics of the ICE dollar index

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How NBU plans to amend method of exchange rate calculating

The National Bank has submitted for public discussion proposals on amendments to the Regulation on establishing the official exchange rate of the hryvnia against foreign currencies and calculating the reference value of the exchange rate against the US dollar and the book price of the bank metals. The amendments include:

  • adjusting approaches to cutting off transactions with extreme parameters;
  • changing the time of data collection to calculate the official hryvnia exchange rate and changing the time of its publication (before 15:30, and not until 16:00, as it is now);
  • determining the mechanism for calculating the reference value of the exchange rate of the hryvnia to the US dollar under special conditions.

The NBU accepts proposals and objections from market participants until November 28.

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