Issue #2 – February 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.
February 2025 brought relative stability to the Ukrainian currency market without any sharp jumps, but some trends continue to form the backdrop for future changes. After the January increase in demand for foreign currency, which was typical for the beginning of the year, the situation has gradually leveled off. The hryvnia maintains a balance between internal factors, including the NBU’s monetary policy and the balance of payments, and external factors, including the US Federal Reserve’s decisions, the ECB’s policy, and general trends in international markets.
Analysis of the current situation
The hryvnia remains stable within a narrow range
In early February, the hryvnia exchange rate against the US dollar and the euro tended to decline, but after February 13, the situation stabilized. The dollar on the cash market was in the range of 41.40-42.00 UAH/$, while the euro fluctuated between 43.00-44.00 UAH/€. The bid-ask spread for the dollar remained in the range of 50-60 kopeks, and for the euro it was 60-70 kopeks, indicating a balance between supply and demand.
The depreciation in the first half of the month was caused by several key factors
Ø Increased supply of cash currency – banks imported significant amounts of dollars, which created a temporary oversupply in the market: according to the NBU, the volume of cash dollars imported into Ukraine amounted to $1.316 billion, and cash euros – the equivalent of $450 million, which allows to meet market demand.
Ø The NBU continued to pursue a policy of restraining exchange rate fluctuations by using interventions. An additional factor was the seasonal decline in demand for foreign currency after the holidays.
However, the second half of February brought some changes. Despite the absence of pressure on the hryvnia from global FX market factors, the dollar continued to strengthen on international markets, thanks to strong US economic data and the Fed’s tightening monetary policy rhetoric. The euro, which had been falling in the first half of the month, returned to growth on February 13 and subsequently stabilized after the ECB announced that it might support the economy. These processes drove some appreciation of the euro against the hryvnia.
Dollar exchange rate forecast
Short-term forecast (2-4 weeks)
The dollar is expected to remain in the range of UAH 41.50-42.20/$. The main factors that will influence the market will be the NBU’s decision on the key policy rate on March 6 and the US Federal Reserve’s policy. The expected increase in the NBU’s discount rate may temporarily strengthen the hryvnia, while its maintenance at the current level will allow the exchange rate to fluctuate within the specified range.
Medium-term forecast (2-4 months)
The hryvnia may gradually weaken in the spring, especially if the foreign trade deficit grows. If the current level of key macroeconomic indicators and reserves is maintained, the NBU will be able to control the hryvnia exchange rate, but the average forecast corridor for the dollar will shift to UAH 42.50-44.00/$. The main risks remain possible delays in international financial assistance and an increase in the budget deficit.
Long-term outlook (6+ months)
By the end of the year, the dollar may reach UAH 44.50-45.50/$, especially if economic growth remains low. At the same time, the easing of the US Federal Reserve’s policy in the second half of the year may create preconditions for some stabilization of the exchange rate. However, even in this scenario, the hryvnia remains within the range of the projected average annual exchange rate.
Euro exchange rate forecast
Short-term forecast (2-4 weeks)
The euro is likely to remain in the range of UAH 43.30-44.20/€ with periodic corrections depending on fluctuations in the euro/dollar pair on the global market. If the dollar continues to strengthen, the euro may approach the lower end of the forecast range.
Medium-term forecast (2-4 months)
If the European economy stagnates and the Fed tightens its policy, the euro may fall to 42.50-43.50 UAH/€. At the same time, if the ECB signals its intention to support economic growth, the euro may remain relatively stable.
Long-term outlook (6+ months)
The euro has the potential for a moderate decline in 2025, especially if the ECB continues to ease policy. In this case, the hryvnia may remain relatively stable against the euro or even strengthen slightly.
Recommendations for businesses and investors
In the short term, businesses can focus on the current stability of the hryvnia and continue to diversify their currency risks.
An increase in the share of dollar assets may be advisable, especially if the Fed does not change its tightening policy.
Private investors should take a balanced approach to foreign exchange transactions. Investments in euros may not bring quick short-term profits due to the weakness of the European economy, but the dollar remains a reliable tool for preserving capital.
In the long term, the main risk to the hryvnia exchange rate is a possible increase in the budget deficit and rising inflationary pressures in Ukraine. Savings should be kept in hard currency or diversified into assets less sensitive to exchange rate fluctuations.
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 warranties 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.
Private companies are building new terminals in deep-water ports despite the surplus of transshipment capacity in 2024-2025 marketing year (MY), said Yuriy Vaskov, former deputy minister of development of grommads, territories and infrastructure (Ministry of Development).
“Regarding seaports today we have a surplus of transshipment capacity, but it is a difficult 2024-20525 marketing year … Even in the period of surplus capacity, several companies are building new terminals in deep-water ports, grain terminals. But, unfortunately, still do not have the opportunity to build their own berthing facilities on the lands of the water fund,” he said at the conference ‘Agro Sector 2025: Challenges and Opportunities in the New Realities’, organized by the analytical center We Build Ukraine on Thursday.
According to Vaskov, to increase the flow of private investment in the construction of port infrastructure, changes in legislation are needed, in particular, government decisions that will regulate the issue of construction on water fund lands.
“Tens, maybe even hundreds of millions of dollars now cannot be invested, I emphasize, in private business solely because of the uncertainty of this procedure,” Vaskov emphasized.
The National Bank of Ukraine (NBU) has fined PJSC USK Knyazha Vienne Insurance Group (“Knyazha VIG”, Kiev) for UAH 2.057 million for violation of the legislation on protection of the rights of consumers of financial services, defined by the Civil Code of Ukraine and the laws of Ukraine “On electronic commerce”, “On insurance”, “On financial services and financial companies”.
According to the website of the NBU, the relevant decision of the Committee for supervision and regulation of non-banking financial services markets made on February 24, 2025, based on the results of a scheduled inspection of the company.
In addition, the regulator applied to the company a measure of influence in the form of imposing a fine of UAH 40 thousand for providing it with reporting files with inaccurate reporting indicators for the first half of 2024.
The company is obliged to pay the fines within a month after the decision comes into force.
In addition, the regulator sent the company a written warning for violation of requirements to: the management system of the insurer, the protection of the rights of consumers of financial services, the regulation of the activities of participants of the market of non-banking financial services, the activities of separate subdivisions.
IC “Knyazha VIG” is obliged to eliminate violations, and also the reasons and the conditions promoting their commitment, till April 25.
IC Knyazha VIG is a part of NFG Vienna Insurance Group Ukraine, the main shareholder of which is Vienna Insurance Group AG Wiener Versicherung Gruppe (Austria).
Real GDP percentage changes over previous period in 2014-2024
Source: Open4Business.com.ua
The total supply of office space in Kiev increased by 34 thousand square meters, or 4%, to 2.26 million square meters in 2024, the press service of CBRE Ukraine told Interfax-Ukraine. According to the latest research of Kyiv office real estate market by CBRE Ukraine, business centers Tw12ve (16 thousand sq. m.), Heritage (13.3 thousand sq. m.) and Stoic (4 5 thousand sq. m.) were commissioned in 2024.
The rate of commissioning of new office space last year was the lowest since 2017. Among the key factors limiting developer activity, CBRE Ukraine highlighted security risks and uncertainty, rising construction costs, limited access to financing and a shortage of skilled labor.
At the same time, rental market activity increased: the volume of annual gross absorption amounted to about 129 thousand sqm (+42% y/y).
“It is noteworthy that the volume of absorption in 2024 corresponds to the level of 2020 and remains only 4% lower than in 2021, reflecting almost a return to pre-war market conditions,” said Anna Silvestrova, Senior Director of Office Real Estate and Tenant Relations at CBRE Ukraine.
The structure of gross absorption was dominated by small transactions of 200-500 sqm, while large transactions of over 4-5 thousand sqm were sporadic, although several significant transactions supported the market. The structure by business sector was dominated by IT and telecom companies with a 25% share (-26% YoY), followed by the public sector (government or non-profit organizations) with a 15% share (-8% YoY).
Moves continued to lead by deal type with 38% (-20pc y/y), rising to 25% (+15pc y/y) of exit deals.
“While in the pre-war period relocations were mainly driven by lease expirations or staff expansions/downsizing, current market conditions have led to a structural shift, allowing companies that were previously non-users of professional office space to move into Class A and B properties. This trend has attracted new tenants to areas previously dominated by large corporate companies, emphasizing the growing availability of quality office space,” says Silvestrova.
The average vacancy rate on the office real estate market decreased by 2.7 p.p. since the beginning of the year to 22% y/y. This was the first significant year-on-year increase in occupancy since pre-war 2021 (when vacancy was at 14.1%).
The bulk of vacancy was concentrated in new developments, some of which are almost entirely vacant, as well as in lower quality buildings typically located outside the DDR. Notably, Class B vacancy fell significantly to 22.1% (-5pc YTD), mainly due to tenants moving out of non-professional properties. At the same time, vacancy in Class A office space remained stable at 22.7% at the end of the year.
The effective prime rate remained stable at $19/sqm/month. Asking rental rates in Class A and B facilities fluctuated within $16-22/sq.m/month and $8-15/sq.m/month respectively.
The gap between declared and effective rates in the best properties continues to narrow, indicating that landlords have shifted to a more realistic approach to pricing. The market has predominantly returned to standard 3-5 year leases with more flexible terms, including early exit options. However, in some cases there is still a practice of locking in favorable lease terms until the end of martial law or for a term mutually agreed upon by the parties.
“We expect that rental activity should maintain positive momentum in 2025, contributing to further growth in office occupancy. Tenants will continue to focus on quality office buildings with safety shelters in sought-after locations, while properties that do not meet these requirements will continue to face occupancy issues,” says Silvestrova.
In the absence of significant security or economic shocks, she says, the market is poised for a gradual but steady recovery, especially with the widely anticipated end of hostilities in 2025.
Headquartered in Dallas (USA), CBRE is the world’s largest commercial real estate consulting and investment company with revenues of $35.8 billion in 2024. CBRE Group Inc. shares are traded on the New York Stock Exchange.
CBRE’s Ukrainian office was opened in January 2008 and is part of the company’s affiliate network. In 2023, the Ukrainian office expanded its presence in Moldova under the CBRE Moldova brand.
