“Ukrainian exporters have increased their sales. In particular, due to the growth of world prices for foodstuffs and products of the mining and metallurgical complex. As a result, the sale of foreign currency by businesses in the interbank market increased. Secondly, the population continued to sell more currency than to buy. Third, the decrease in military tension at the borders helped to improve the situation on the foreign exchange market. In addition, the interest of non-residents in Ukrainian securities has now renewed, which creates an additional supply of foreign currency,” Heletii said.
According to Yurii Heletii, the NBU does not forecast the exchange rate and does not target it:
“We do not plan foreign exchange interventions in advance. It's impossible. The key factor of presence or absence in the foreign exchange market is the amplitude and speed of exchange rate changes in any direction during the day. At the beginning of June, with the intensification of the demand of non-resident invest.com/investing-in-ukraine/service-for-investors/" rel="dofollow">investors in government bonds, the supply of foreign currency increased significantly, and the exchange rate began to revalue rather quickly. It was to smooth out excessive fluctuations that the National Bank bought foreign currency on the interbank market,” Heletii said.
The deputy head of the NBU also noted the contribution of foreign investors to strengthening the position of the hryvnia and its exchange rate:
“In May, strong support for the supply of foreign currency was provided by its sale in order to pay quarterly taxes, which, by the way, were collected in May more than planned. Also in May, non-resident investors stopped exiting domestic state loan bonds (in May the balance of their operations on the market was close to zero, while in April they bought $260 million). In June, non-residents have already resumed the purchase of government bonds and thus formed a significant supply of foreign currency. Since the beginning of the month, they have already sold more than $400 million,” Heletii added.
The last months of 2021 are a favorable environment for the development of Ukrainian foreign markets for the export of Ukrainian goods. For example, in 2021, record high volumes of currency were sold by representatives of the mining and metallurgical sector.
They also discussed the issue of the influence of seasonal conditions on the foreign exchange market in recent years: “Up to 80% of the foreign exchange supply is formed by such industries as the mining and metallurgical complex and the agro-industrial complex. The latter industry has pronounced seasonal cycles — a certain increase in sales in the spring during planting and a significant increase in the fall, when the new crop is being harvested and processed. Also, the supply of currency increases with the payment of quarterly taxes (this is the second month of the quarter).”
Seasonal factors of demand for currency are also interconnected with the capacity of budget spending. Usually these costs increase towards the end of the year, and this year the foreign exchange market was affected by the costs for April-May. In particular, the costs of purchasing vaccines from Covid-19.
“Over the past years, these seasonal patterns have been relevant. However, sometimes non-seasonal factors can also significantly neutralize the influence of seasonal ones. These include, in particular, the event and exit of non-residents to DSLBs or from DSLBs. For example, in April, under the aggravation of the conflict with our northern neighbor, non-residents sold government bonds and bought large amounts of foreign currency, leveling out the influence of the seasonal increase in foreign currency sales by agribusiness companies,” Heletii explained.