Business news from Ukraine

Issue #2 – June 2025

The purpose of this review is to provide an analysis of the current situation on the Ukrainian currency market and a forecast of the hryvnia exchange rate against key currencies based on the latest data. We analyze current conditions, market dynamics, key influencing factors, and likely scenarios.

Analysis of the current situation on the Ukrainian currency market

Ukraine’s foreign exchange market is entering the second half of the year amid relative stability in the domestic market and growing turbulence in the external market.

The current dynamics of the foreign exchange market is shaped by both external and internal factors that have the potential to change the exchange rate trajectory in the near future. The main topics of late June were the global weakness of the dollar, the emergence of new areas of tension on the global map, and the domestic agenda included the activation of the cash market in Ukraine and cautious currency liberalization, which continues under the control of the NBU.

Global context

Global markets are showing a strengthening of the euro amid a weakening dollar. The DXY index has reached its lowest level since 2022 – the US currency has lost more than 10% since the beginning of the year, and this drop could be the largest since the 1970s. The main trigger is political uncertainty in the United States. Rumors about Donald Trump’s intentions to replace the Fed chairman ahead of schedule and interfere with the institution’s activities have raised doubts about the independence of US monetary policy. Against this backdrop, the euro strengthened to USD 1.173, its highest level in three years, while the franc and yen also gained ground.

Although the Fed has so far refrained from changing rates, market expectations have already shifted and, accordingly, are being incorporated by market operators into exchange rate modeling and forecasting – the consensus expectation of international analysts regarding the likelihood of a rate cut at the next meeting has reached 25%.

At the same time, the ECB’s rhetoric remains cautious: the eurozone does not have enough institutional stability to challenge the dollar as the world’s reserve currency. The euro is growing mainly technically, due to the weakening of the dollar, rather than due to fundamental advantages, and strengthening its position is unfavorable for the European Union itself as an additional factor of pressure on exports.

Domestic Ukrainian context

The situation on the Ukrainian market is somewhat different. The cash segment is showing a sharp increase in demand: in May, banks brought $778 million of cash into Ukraine, which is 38% more than in April. In particular, the dollar amounted to $457 million (+52%) and the euro to $318 million (+22%). This indicates an increase in retail purchases, presumably by households that are either trying to lock in current exchange rate levels or increase savings in foreign currency amid seasonal growth in income and remittances, as well as increased devaluation expectations.

The charts show a widening of the spread between the euro buying and selling rates, which accompanies the growth of cash in the market. This signal is an indicator of nervousness in exchange offices and uncertainty about further exchange rate movements. The selling rate reacted more sensitively to the NBU’s exchange rate hike, while the buying rate grew more smoothly, indicating an imbalance in the supply/demand structure.

The National Bank of Ukraine maintains an active stance. Currency liberalization continues, but in a targeted manner, based on the principle of “new money – new conditions.” The NBU is not ready to completely lift restrictions and publicly recognizes that the risks of currency outflows are too high, which could upset the market balance.

The NBU’s readiness to ease restrictions or announcements of such actions could be a clear indicator that the ruling economic bloc has a fundamental vision of how to ensure a long-term balance in the domestic FX market, given the confirmation of further assistance from partners.

The government will soon declare its expectations for the average annual dollar exchange rate as part of the 2026 budget process.

Thus, the domestic FX market is entering a phase of searching for a new balance between controlled stability and growing external and internal risks.

US dollar exchange rate: dynamics and analysis

In June, the USD/UAH exchange rate remained generally stable with a moderate upward trend at the end of the month. Over the course of 30 days, the average purchase rate in banks increased from UAH 41.20 to UAH 41.42 per dollar, and the sale rate from UAH 41.70 to UAH 41.95 per dollar. The official NBU exchange rate rose from 41.52 to 41.69 UAH/$ over the same period.

In the shorter term, over the last week, the market showed stabilization after peaking in mid-June: the buying rate decreased from UAH 41.60-41.40/$, the selling rate was at UAH 42.15-41.95/$, and the official rate remained in the range of UAH 41.83-41.64/$. Thus, there were no sharp fluctuations and the exchange rate dynamics remained controlled.

The dynamics of spreads between buying, selling, and the official exchange rate shows that banks do not expect significant changes in the market and do not include additional premiums or risks in the exchange rate. This indicates a balance of demand for the dollar, stability in market behavior, and the absence of panic or speculative sentiment.

Key influencing factors:

• Stable monetary policy of the NBU: The regulator continues to smooth out fluctuations, maintaining the official exchange rate in a narrow band.
• Balanced supply and demand: the increase in cash imports in May (by 38% m/m) did not put pressure on the exchange rate, indicating that the cash market is sufficiently liquid.
• International factors: the dollar’s devaluation on the global market (the DXY index has lost more than 10% since the beginning of the year) eases external pressure on the hryvnia, while the strengthening of the euro partially shifts demand to another currency.
• Behavioral expectations of the market: the dollar remains a “basic asset” in the domestic market, but there is no surge in demand for it – players do not expect force majeure in the coming weeks.

Forecast:

• In the short term (2-4 weeks), the hryvnia is likely to fluctuate between UAH 41.30-42.00, without going beyond UAH 42.10, in the absence of external shocks or short-term situational outbursts.
• Medium-term (2-4 months): a return to the levels of 42.00-42.50 UAH/$ is possible in the event of stronger import demand, higher budget payments, or the realization of financing risks or changes in the expectations and sentiments of the population and market operators.
• Long-term (6+ months): the baseline scenario assumes a gradual devaluation of the hryvnia to UAH 43.00-44.50/$ amid a likely reduction in external support and pressure on public finances. Such a scenario could be prevented by the government and the NBU’s declarations on exchange rate policy for 2026, which could partially calm the devaluation expectations of the market and economic agents.

Euro exchange rate: dynamics and analysis

In June, the euro demonstrated steady growth with minimal deviations, strengthening its position amid a weakening US dollar on global markets and continued strong demand for the euro in Ukraine. Over the past 30 days, there has been a gradual but steady increase in all key benchmarks: the average bid rate rose from ~46.80 to ~48.60 UAH/€, the ask rate from ~47.50 to almost 49.40 UAH/€, and the official NBU rate from ~46.90 to 48.48 UAH/€. The last week of June showed a certain acceleration of these dynamics.

These changes indicate a strong upward trend in the euro amid a weakening dollar, speculative interest, and a gradual recovery in import activity.

Key influencing factors:

• The global strengthening of the euro: the euro/dollar exchange rate reached 1.173, the highest level in three years, which partially explains the euro’s appreciation against the hryvnia.
• High demand for cash currency in Ukraine: In May, banks imported $778 million in cash, of which $318 million was in euros (+22% y-o-y), reflecting increased interest in this currency.
• Expectations of a US Federal Reserve rate cut: as a result, pressure on the dollar and the flow of assets into euros.
• Lack of strict NBU control over the euro: it is easier for market operators to reflect international trends in domestic prices.

Forecast:

• In the short term (2-4 weeks), given external factors and stable demand, the euro may head towards the range of 49.00-49.50 UAH/€, with a possible breakout to 50.00 UAH/€ if it receives additional external drivers.
• Medium-term (2-4 months): a breakout above UAH 50.00 is likely, especially if the euro remains at its global high and the current international drivers of its growth remain in place.
• Longer-term (6+ months): if the current global situation with its drivers pushing the euro upwards remains unchanged, the euro is likely to reach levels above UAH 53.00-55.00/€ if global markets finally shift in favor of the euro and the ECB and the EU do not take measures to counter the upward trend.

In general, the euro market in Ukraine is showing a trend of active growth amid both global factors and domestic demand. The single currency is currently showing significantly higher volatility and market dynamics than the dollar.

Recommendations for businesses and investors

July will bring controlled stability to the dollar and strong growth to the euro. All of this is against the backdrop of a global tug-of-war between the dollar and the euro. In such an environment, the currency strategy should remain flexible, adaptable and designed for several different scenarios.

Liquidity is paramount. All foreign currency assets should be held in instruments with the ability to respond quickly. Time deposits, bonds without the possibility of early withdrawal, or pegging to one currency are potential traps. In the coming months, the focus should not be on yield, but on maintaining the ability to maneuver quickly.

Euro – growth has gained market momentum. After a significant rise in June, the market is still in the phase of appetite for the euro, and although some of the news has already been taken into account, volatility remains. If you need to reformat the share of this currency in your portfolio, it is best to do so gradually, when spreads narrow or pressure from global drivers decreases.

The dollar is still an important element of protection. The current stability does not mean that the dollar has lost its functions and appeal. On the contrary, it is worth keeping in your portfolio in the medium to long term: a devaluation trend for the hryvnia is likely in the fall or winter, which will reward patient dollar holders with strong nerves.

Spreads are the main marker for decisions. While spreads remain stable on the USD/UAH pair, they are widening again on the EUR/UAH pair. This indicates the return of nervousness and uncertainty: when operators put additional margin into the rate, it is a signal to take your time. When the spread is narrowing, it is time to analyze entry.

Fixed “currency benchmarks” are forbidden. The exchange rate predictability of recent weeks is not a basis for patterned actions or excessive optimism. Continue to work with 3-4 exchange rate scenarios and test how your asset structure will work in each of them.

Hryvnia – do not hold more than you need. It is still stable, but external imbalances are growing. Excessive accumulation of hryvnia funds creates risks. The hryvnia mass in excess of the operating reserve should be transferred to any of the reliable currencies or instruments linked to them.

Currency liberalization is more of a signal than an instruction to act. The NBU’s signals about easing restrictions are important, but so far they are more of a symbolic step. The real effect will be seen closer to the fall. Investors and businesses should not only follow the liberalization steps, but also keep in mind the possibility of the regulator’s reverse actions if the exchange rate scenario forces it to return to restrictions. You may want to consider investing in currency instruments that are least dependent on government actions, such as cash or stablecoins based on reliable currencies.

Keep your focus on the euro. If your business model involves expenses or revenues in euros, you should review the structure of currency risk, build a safety margin into contracts or test possible scenarios for a breakout above 50 UAH/€.

What is important in the news. First of all, the publication of indicators and exchange rate targets of the government and the NBU for 2026 as part of the budget process.

This material was prepared by the company’s analysts and reflects their expert, analytical professional judgment. The information provided in this review is for informational purposes only and should not be construed as a recommendation for action.

The Company and its analysts make no representations and assume no liability for any consequences arising from the use of this information. All information is provided “as is” without any additional guarantees of completeness, obligations of timeliness or updates or additions.

Users of this material should make their own risk assessments and informed decisions based on their own evaluation and analysis of the situation from various available sources that they consider to be sufficiently qualified. We recommend that you consult an independent financial advisor before making any investment decisions.

REFERENCE

KYT Group is an international multi-service product FinTech company that has been successfully operating in the non-banking financial services market for 16 years. One of the company’s flagship activities is currency exchange. KYT Group is one of the largest operators in this segment of the Ukrainian financial market, is among the largest taxpayers, and is one of the industry leaders in terms of asset growth and equity.

More than 90 branches in 16 major cities of Ukraine are located in convenient locations for customers and have modern equipment for the convenience, security and confidentiality of each transaction.

The company’s activities comply with the regulatory requirements of the NBU. KYT Group adheres to EU standards, having a branch in Poland and planning cross-border expansion to European countries.