NBU's FX interventions down by 14.1% over week

Last week, the National Bank of Ukraine (NBU) reduced the sale of US dollars on the interbank market by $91.7 million, or 14.1%, to $559.8 million, according to statistics on the regulator's website.

According to the NBU, in the first four days of last week, the average daily negative balance of buying and selling forex currency by legal entities increased to $66.5 million from $49.6 million in the same period a week earlier and totaled $266.2 million.

On the population's foreign exchange transactions market, on the contrary, the negative balance decreased to $34.6 million from $43.7 million in the week before last, and all days the sale of non-cash currency exceeded its purchase.

The official hryvnia to US dollar exchange rate, which started last week at UAH 41.2502/$1, weakened to UAH 41.4939/$1 in four days - the hryvnia has not been so cheap since mid-August, but according to the results of trading on Friday, the National Bank slightly strengthened the national currency - to UAH 41.4789/$1.

On the cash market, the US dollar exchange rate over the past week has changed along the trajectory of the official one, but not with such a large amplitude, so in total, the US dollar has appreciated by 15 kopecks over the week: buying – up to UAH 41.38/$1, and selling – up to UAH 41.45/$1.

At the end of last week, the National Bank noted that it does not use international reserves to artificially "hold" the exchange rate. Instead, it redirects part of the foreign aid sold to the NBU directly to the foreign exchange market.

"Thus, the NBU's structural interventions are largely technical operations determined by the peculiarities of current market functioning and do not indicate the use of interventions for monetary policy purposes. The stable preservation of reserves at a high level [$46 billion at the beginning of September] indicates balanced forex currency demand and supply," the National Bank emphasized.

The NBU noted that such interventions create the prerequisites for bilateral exchange rate fluctuations in response to changes in market conditions. The regulator added that this is the exchange rate flexibility the NBU seeks to gradually strengthen because it improves the resilience of the economy and the foreign exchange market to domestic and external shocks.

"The growth of international reserves, the narrowing of the spread between the official and 'cash' rates, the gradual improvement of exchange rate expectations, and the restrained demand for foreign exchange currency by the population indicate the stability of the managed flexibility regime under current conditions. As before the full-scale invasion, the NBU is smoothing out excessive exchange rate fluctuations. This helps keep expectations under control, bring inflation to the 5% target, maintain interest in long-term hryvnia instruments, and reduce risks for international reserves," the NBU said in the statement.