Issue 1 – January 2025
The purpose of this review is to analyze the current situation on the Ukrainian currency market and forecast the hryvnia exchange rate against major currencies based on the latest data. We look at the current conditions, key influencing factors, and likely scenarios.
Analysis of the current situation
At the beginning of 2025, the Ukrainian currency market is showing relative stability after the seasonal fluctuations that characterized the end of the previous year. The National Bank of Ukraine (NBU) continues to actively support the market with verbal and resource interventions, without exposing its reserves to significant risks. This helps to avoid sharp exchange rate fluctuations and maintains the confidence of economic entities in the predictability of the national currency.
At the same time, high inflation and devaluation expectations among households and businesses may stimulate increased demand for foreign currency. This may become an additional and more significant factor of pressure on the hryvnia. According to UNB surveys, businesses expect moderate inflation and exchange rate growth, which affects investment and development decisions, as well as planning prices for goods and services, which may exceed the current exchange rate during the year and have a negative inflationary impact, spinning up the devaluation flywheel of negative expectations.
Dollar exchange rate forecasts
Short-term outlook
In the short term, the hryvnia exchange rate is expected to remain in the range of 42-43 UAH/$, given the stabilization of the currency after the seasonal increase in demand for it at the end of last year. Low economic and business activity in January will help keep the exchange rate stable in the short term. This is evidenced by the spread between the buying and selling rates of the US dollar: it remains relatively stable, indicating that supply and demand in the Ukrainian foreign exchange market are balanced.
Medium-term outlook
In the first half of 2025, the hryvnia exchange rate is likely to gradually approach 44 UAH/$, which is fully in line with the government’s budget forecast for 2025. Avoidance of extreme exchange rate fluctuations in the first half of the year will allow the NBU and the government’s economic bloc to maintain foreign exchange reserves to keep the hryvnia within the expected parameters of an average annual exchange rate of 45 UAH/$. Controlled devaluation may become one of the tools to fill the budget at the expense of tariffs and other fees fixed in foreign currency, including some excise taxes.
Euro exchange rate forecast
Short-term forecast
The euro continues to depreciate against the hryvnia, reaching the levels of UAH 43.25-44.15/€. Despite the downward trend in the euro, the spread between the buy and sell rates remains relatively stable, which also indicates that the market is balanced. In the short term, the euro is expected to remain within this range with further movement to UAH 43-44/€, taking into account current trends in international markets and domestic economic factors.
Medium-term forecast
In the coming months, the euro may experience significant fluctuations, which may be due to possible “exchange rate wars” between the US and the EU, as indicated by representatives of the future administration of US President-elect Donald Trump. They claim that a change in the dollar’s parity with the euro is one of the sources of strengthening the American economy.
These verbal interventions, if transformed into real actions, may cause turbulence in the international currency market, which will naturally affect the exchange rates of major world currencies in Ukraine.
Key factors affecting the foreign exchange market
Foreign economic factors. Possible “currency wars” between the US and the EU, as reported by international economic media, may affect global currency markets and, accordingly, the hryvnia exchange rate against major currencies.
2. Inflation and devaluation expectations. High expectations of households and businesses stimulate demand for foreign currency, putting additional pressure on the hryvnia. According to UNB surveys, businesses expect moderate inflation and exchange rate growth.
3. Monetary policy of the NBU. The NBU will continue its policy of controlled flexibility of the exchange rate and will intervene to contain sharp fluctuations.
4. Tax changes. Increase in tax rates on deposit income may stimulate demand for cash, which will put additional pressure on the hryvnia exchange rate.
5. Business climate. Reports of massive business closures due to an increase in the tax burden should not be viewed as a clear symptom of a decline in business activity, as this may only be a sign of business shadowing, which could become an additional driver of demand for foreign currency.
Recommendations for companies and investors
Short-term strategies: focus on maintaining liquidity. Use foreign currency deposits or short-term bonds to preserve capital. The period of increased volatility is an ideal time for experienced investors, while inexperienced investors should avoid risky investments.
Medium-term strategies: build a balanced currency portfolio with a predominance of the US dollar, given its stability in the international economy. If you have economic ties with the eurozone countries, their currencies are becoming increasingly attractive for gradual replenishment of savings. The currencies of EU member states can be a temporary refuge for savings in times of turbulence on international markets. Risk-averse investors should focus on fixed income instruments.
Long-term strategies: Protect your savings from devaluation risks by keeping most of your capital in hard currency or by looking for stable sources of income over the long term. Consider diversifying into safe havens and alternative assets such as gold or cryptocurrencies.
Risk management: This factor comes to the fore. Constantly monitor tax and regulatory changes, which are becoming a key risk factor in the field of legal financial transactions and banking. Avoid excessive accumulation of short- and medium-term assets in hryvnia. Consider geographical diversification of assets and operations in more regulatory stable jurisdictions.
This material was prepared by the company’s analysts and reflects their professional and analytical judgment. The information provided in this review is for informational purposes only and should not be considered a recommendation for action.
The company and its analysts make no representations and assume no responsibility for any consequences that may arise from the use of this information. All information is provided “as is” without any other warranty of completeness, timeliness or obligation to update or supplement it.
Users of this material should make their own risk assessments and make informed decisions based on their own assessment and analysis of the situation from various available sources that they believe to be sufficiently qualified. We recommend that you consult an independent financial advisor before making any investment decision.
REFERENCE
KYT Group is an international multiservice 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 foreign exchange operations. KYT Group is one of the largest players in this segment of the Ukrainian financial market, is among the largest depositors and is one of the industry leaders in terms of asset and capital growth.
More than 90 branches in 16 largest cities of Ukraine are located in convenient locations and equipped with modern equipment, which ensures 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, has a branch in Poland and plans cross-border expansion to European countries.
