The growth of the dollar exchange rate on the interbank market will not last long

After a sharp drop in the dollar exchange rate against the hryvnia to the level of 27 UAH/., exporters restricted the sale of foreign currency, and buyers increased demand, which led to an increase in the exchange rate for the week by 25-30 kopecks to 27.32/27.34 UAH/..

Friday's rise in the price of the dollar was explained by speculative games, and on Tuesday the exchange rate was supposed to decline due to the next auction of the Ministry of Finance for the sale of government bonds and additional currency receipts to the interbank market through the weekend on Monday. However, the dollar continued to rise in price.

At the auction on June 22, the Ministry of Finance placed securities worth UAH 11.383 billion.:

• maturing on 01.12.21 – at 9.0% per annum in the amount of UAH 481 million,
• maturing on 20.07.22 – at 10.97% per annum in the amount of UAH 2.07 billion,
• maturing on 23.11.22 – at 11.3% per annum in the amount of UAH 1.465 billion,
• maturing on 24.05.23 – at 12.0% per annum in the amount of UAH 3.548 billion,
• maturing on 22.05.24 – at 12.3% per annum in the amount of UAH 135 million,
• maturing on 13.05.26 – at 12.59% per annum in the amount of UAH 643 million,
• maturing on 23.06.22 – at 3.7% per annum in the amount of 1 112 million.

Compared to previous auctions, the weighted average yield of securities remained almost unchanged, but the demand for short-term government bonds increased to 1 year.

The seasonal decline in foreign currency receipts from the sale of agricultural products and an increase in demand for it from tourists vacationing abroad also affected the exchange rate. However, the start of harvesting and increased exports in July will increase the inflow of foreign currency, especially given the increase in prices for agricultural products by 15-30% compared to last year.

In the context of situational violations of the balance of supply and demand, it is very important for the National Bank to enter the market with interventions for buying and selling currency and the exchange rate at which it will conduct operations. Exchange rate trends this week will depend on the actions of the regulator.

The National Bank left the discount rate unchanged, so investors understand what kind of yield of government bonds should be expected in the future.

According to the state statistics service, Ukraine's real GDP in the first quarter of 2021 will decrease not by 2%, as planned, but by 2.2%. The decline in real GDP began in the first quarter of 2020 and amounted to 1.2%. In the second quarter, it accelerated to 11.2%, in the third – reached 3.5%, in the fourth – 0.5%.

The decline in the economy, which continues for 5 consecutive quarters, increases pressure on the hryvnia exchange rate. However, the reduction in imports and, as a result, demand for foreign currency against the background of growing revenues from agricultural exports will improve the situation in the near future.