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Trend to revaluation: what will strengthen the hryvnia and what is the exchange rate forecast for May

Forecast of the hryvnia exchange rate in Ukraine until May 20, 2021. Photo: National Bank

Forecast of the hryvnia exchange rate in Ukraine until May 20, 2021. Photo: National Bank

The strengthening of the hryvnia exchange rate will be moderate and the hryvnia will continue to move in the corridor of 27.6-27.7 UAH per dollar on May 12-20. The dollar exchange rate will continue to fall to 27.5 UAH per dollar until the end of May.

As stated in the weekly forecast of the Ukraine Economic Outlook, in May the market will retain a slight surplus of currency that will support the hryvnia strengthening to 27.5-27.6 UAH per dollar. At the same time, the revaluation will be a stable trend, but the National Bank will not artificially restrain the exchange rate, buying out the excessive supply of foreign currency, since in July-August this year, $2.73 billion from the IMF is expected to enter reserves as part of the allocation of $650 billion of special drawing rights.

The experts note that by the end of the year, the regulator will minimize the volume of currency buybacks from the market and send an emission reserve of 90-100 billion UAH to refinance banks in order to finance the budget deficit later.

Quote"This scenario of the NBU's behavior will additionally support the hryvnia until the end of the year: the Ministry of Finance will continue to replace foreign currency government bonds with hryvnia bonds, thereby limiting banks' demand for foreign currency," is stated in the report.
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Note that on May 11, the hryvnia strengthened from 27.73 UAH to 26.61 UAH per dollar. At the same time, the euro exchange rate increased from 33.5 to 33.6 UAH, and that is associated with the strengthening of the euro against the dollar from 1.20 to 1.215. Thus, due to the successful vaccination in the United States and the likely tightening of the FRS policy to curb inflation, most banks in the world have revised their forecast for the euro/dollar pair at the end of 2021 from 1.25-1.28 to 1.22-1.25 euros per dollar. In the next month, the currency will be in the corridor of 1.2-1.22, being at a local maximum.

Context. Earlier it was expected that until May 2 the dollar exchange rate would move in the corridor of 27.7-28.85 UAH per dollar.

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