National Bank says hryvnia exchange rate fluctuations pose no threat

National Bank says hryvnia exchange rate fluctuations pose no threat

The National Bank of Ukraine (NBU) believes that the dynamic of hryvnia fluctuations in the foreign exchange market is quite safe and has market prerequisites.

NBU Governor Andriy Pyshnyy said this at a briefing, according to an Ukrinform correspondent.

"The exchange rate fluctuations we are currently witnessing do not pose any threat. This dynamic is quite safe and is driven by market conditions," Pyshnyy said.

He reminded that the market is currently in a state of managed flexibility, which implies appropriate exchange rate fluctuations under the influence of supply and demand.

"We are gradually returning to the usual parameters that existed before the war. Thus, with the participation and presence of the National Bank [...] to protect the market from excessive fluctuations," Pyshnyy said.

The National Bank also explained the reason for the slight devaluation of the hryvnia.

"Since the second half of March, government spending has increased, mainly due to international assistance [...]. This significantly impacted the relationship between supply and demand in the market, resulting in devaluation processes. At the same time, the situation on the foreign exchange market remains under control.," said Deputy NBU Governor Yuriy Heletiy.

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He stressed that the NBU is an active participant in the market and is ready to smooth out excessive fluctuations. Moreover, the NBU has a sufficient stock of foreign exchange reserves.

"We are seeing positive trends in the market in terms of increasing its depth. More than 50% of market transactions take place without the NBU's participation. In quantitative terms, this is more than USD 100 million per day. In January, this figure was USD 60 million, and now it is more than USD 100 million. These factors also contribute to the market's controllability and stability. The NBU is in control of the situation, and therefore there is no reason for concern," the NBU Deputy Governor said.

As reported, on October 3, 2023, the National Bank of Ukraine switched to the regime of managed flexibility of the exchange rate. The fixed exchange rate of UAH 36.5686 per U.S. dollar was in effect in Ukraine from the end of July 2022 to October 3, 2023.

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