"The impact of the psychological factor on the foreign exchange market is key at the moment. Demand for foreign currency is largely formed by the population and domestic importing companies. At the same time, exporters have reduced their revenues. However, this situation is not a reflection of fundamental trends in the economy, as Ukrainian exports continue to grow and prices for imported energy are falling," the report said.
The NBU stressed that on March 12, it continued to conduct foreign currency interventions to smooth out excessive fluctuations caused by the deterioration of the sentiment of financial market participants due to the spread of coronavirus worldwide. In total, over $220 million was sold for this purpose.
"At the opening of the interbank foreign exchange market, the National Bank held an auction for the sale of foreign currency. Despite the announced auction for the total amount of $200 million, the total volume of bids by market participants was only $86.4 million, of which the bids for $75.9 million were satisfied. The average weighted exchange rate after the auction was UAH 25.81 per U.S. dollar. The NBU then continued to satisfy excess demand for foreign currency and sold almost $150 million, which supported market quotations at UAH 25.8-26 per U.S. dollar. Thus, the National Bank did not change the general market-forming trend, but only smoothed out excessive fluctuations," the NBU said.
The central bank is set to adhere to the currency intervention strategy and continue to smooth out excessive exchange rate fluctuations. Ukraine's international reserves now exceed $26 billion and are sufficient for this purpose.
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