III. The current situation of hryvnia

The devaluation of the hryvnia is of a situational character and not a stable trend, according to experts polled by Interfax-Ukraine.

"One should not assess the fall in the hryvnia exchange rate against the dollar as the start of a devaluation trend like that of 2008," the director of the treasury of Conversbank, Andriy Ponomariov, said.

"First, free hryvnias are needed to see the real devaluation, but there are no free hryvnias on the market: ending deposits on correspondent accounts of banks at the National Bank of Ukraine (NBU) are at a record low level of Hr 13-15 billion. It is unlikely that the NBU would actively replenish the system with hryvnias through long-term refinancing. Secondly, the high value of the resources in hryvnias and the absence of crediting of clients in foreign currency will stimulate banks to shorten their currency positions to the utmost – 10%, offering available currency risk hedging instruments to their clients," he said.

"I would not say that the hryvnia devaluation on the interbank is a trend. It is likely a situational event linked to tactics of the largest banks on the market," Deputy Board Chairman of Finance and Credit Bank, Serhiy Borysov.

The head of the treasury department at First Ukrainian International Bank, Anton Stadnik, said that the present hryvnia devaluation is of a seasonal character.

"In the second ten days of August and early September, business activity always stirs up, and the exchange rate always fluctuates. I think that in two days the market will calm down if no sharp fluctuations with ending deposits on correspondent accounts are seen," the expert said.

He did not rule out that the tactics of nonresidents on the stock market had affected the hryvnia exchange rate.

"One can assume that the failed auction of the Ukrainian Finance Ministry and withdrawal of nonresidents from government domestic loan bonds has affected the increase of the dollar exchange rate. As everybody knows, after S&P downgraded the United States' rating by one notch, serious fluctuations on all financial and stock markets were seen, which led to the decline of indices. Many investors prefer leaving high-liquid and risky assets, and hryvnia investment in government domestic loan bonds represent such assets for foreign investors," Stadnik said.

Analysts from Forum Bank do not forecast a further weakening of the hryvnia exchange rate in the near term.

"Of course, the exceeding of the psychological indicator of Hr 8/$1 could make many active players on the Ukrainian interbank market uneasy. We do not expect a further weakening of the hryvnia, as the NBU has enough instruments to retain the exchange in the range set in the national budget for this year," the analysts said.

A treasurer of Ukrinbank, Oleg Bronin, also said that the NBU's reserves are enough to smooth out sharp fluctuations of the exchange rate if required.

"The views of the market players for the short-term outlook for foreign currency movement moved towards a fall of the national currency exchange rate on a situational basis. However, I believe that this trend would not last for a long period of time, as forex reserves… allow the NBU to stabilize the exchange rate at Hr 8/$1," he said [6].

Conclusion

Summing up we can say that the hryvnia has a long and interesting history.

Making forecasts for its existence, we can say that if the situation on the currency market in the country as a whole does not change, the hryvnia can be impaired.

Official NBU exchange rate at moment of introduction UAH 1.76/USD 1.

In the period from 21 April 2005 through 21 October 2008 the exchange rate was pegged at around UAH 5/USD 1. In 2008 when global financial crisis hit, the hryvnia was devalued to about 8/USD 1. Because of known economic problem called impossible trinity, having a fixed exchange rate and free movements of capital (i.e. cross-border lending) have undermined National Bank of Ukraine's ability to conduct independent monetary policy.

References:

1) en.wikipedia.org;

2) www.grivna.org.ua;

3) finance.ua;

4) uah. fxdata.ru;

5) fxtalk.info;

6) novosti.dn.ua.

7) www.foreignexchangeservice.co.uk

Date: 2016-04-22; view: 970