Issue No. 1 – April 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

In early April, Ukraine’s FX market continued to demonstrate relative stability in the dollar segment and a noticeable strengthening of the euro.

Both processes have different drivers:

Ø the dollar is depreciating due to the external weakness of the US dollar;

Ø the euro is growing both as a result of the global trend and structural demand for the euro in Ukraine;

Ø in general, the Ukrainian FX market is characterized by growing liquidity, narrowing spreads, and decreasing volatility against the dollar, which is evidence of the formation of relative predictability of future exchange rate trajectories.

Internal factors and NBU policy

The NBU continues to adhere to its policy of soft control over the foreign exchange market, is present on the interbank market, and maintains its influence on the official exchange rate. At the same time, market quotes for buying and selling currencies are increasingly close to the official exchange rate, which indicates growing confidence in the predictability of regulatory policy.

The acceleration of consumer inflation to 1.5% in March ( 14.6% y/y) and core inflation to 1.4% poses an additional challenge: on the one hand, it may create incentives for the NBU to raise its key policy rate, and on the other hand, it undermines the attractiveness of hryvnia instruments in the short and medium term.

It is also worth noting that in March, Ukrainians reduced their net purchases of foreign currency from banks to $720 million, which was the lowest level of the quarter. This means that the market is saturated with foreign currency, although demand still exceeds supply.

In the future, it is worth paying attention to Ukraine’s foreign trade balance: in January-March 2025, imports exceeded exports twice ($18.5 billion versus $9.9 billion). This indicates a rapid “washout” of foreign currency liquidity from Ukraine. However, this factor can be compensated for if the volume and rhythm of support from external partners and creditors remain the same. Otherwise, sooner or later, the “washout” of foreign currency liquidity may lead to new currency restrictions, primarily for businesses and less likely for households.

The current structure of imports, which is based on machinery, chemicals, and energy, creates a steady demand for foreign currency. The balancing factor is a slowdown in imports, which could ease pressure on the hryvnia in the short and medium term.

In addition, according to economic experts, the equivalent of $130 billion in cash currency may be in circulation outside the banking system, which is a stabilizing buffer for the market.

In addition to international and structural factors, the dynamics of the dollar and euro against the hryvnia may be further influenced by the intensification and growth of transactions between key currencies by households and businesses to change their shares in their savings and investment portfolios. This will add liquidity to the market, although it may also drive exchange rate movements under the influence of speculation. This trend is already becoming noticeable for the euro, which is increasingly becoming attractive for savings and exchange rate premiums amid its growth.

International factors

The global currency market is in the midst of turbulence due to the new US tariff policy introduced by President Donald Trump. And even more so, under the influence of its unpredictability: news and statements that set the trend at the opening of markets lose their relevance or are refuted during the trading session, adding to market nervousness and uncertainty, which forces most economic agents to increase risk premiums.

These processes have triggered unprecedented volatility in many markets, including commodities and stocks, which has led investors with less risk appetite to increase their demand for safe-haven assets, including gold. The flight of liquidity from the dollar weakened it at certain points to a 6-month low.

Against this backdrop, the euro is strengthening, and global expectations of a US Federal Reserve rate cut are growing. This creates technical room for further euro appreciation.

Overview of dynamics and exchange rate forecast

US dollar exchange rate

In the first ten days of April, the average dollar to hryvnia exchange rate maintained a steady downward trend that has been in place since the beginning of 2025.

The range of fluctuations in March and early April narrowed to UAH 41.20-41.80/$, reflecting the high stability of supply and demand in the market. This is one of the narrowest corridors over the past six months.

The lowest value was recorded at around UAH 41.10/$ in the purchase segment in the first days of April, amid a weakening US dollar on global markets and a decline in demand for the currency domestically.

The further reduction of the spread between the bid and ask rates is particularly significant: in January it exceeded UAH 1, and in April it decreased to less than 60 kopecks, indicating an increase in foreign exchange liquidity, a decrease in panic or speculative expectations, and increased competition between FX market operators, who are guided by the NBU’s official exchange rate and keep the competitive spread within acceptable limits for the market.

Another important indicator is the convergence of bid and ask rates with the NBU’s official exchange rate: market rates for buying and selling the dollar began to move almost synchronously with the official rate, without significant deviations and within +\- 25 kopecks of the official rate, which reduces market volatility.

Ø In the short term (2-4 weeks), the dollar is likely to move smoothly in the range of UAH 41.10-41.80/$ with possible adjustments within 20-30 kopecks due to situational demand.

Ø In the medium term (2-4 months), the hryvnia may return to the range of UAH 41.80-42.50 in the event of rising inflation, import activity, or pressure on the budget.

Ø In the longer term (6+ months), we maintain our forecast that the exchange rate may move towards UAH 45.00/$.

Euro exchange rate

During March and the first decade of April, the euro showed a clear upward trend, compensating euro holders and recovering all the corrections since the beginning of the year, reaching its highest levels since the beginning of the year and even a peak before the start of the recession in mid-October 2024.

The widening of the spread between buy and sell rates is particularly noticeable: while it used to fluctuate between 60 and 70 kopecks, in April it sometimes reached UAH 1, and for some FX market operators it was over UAH 2. This is an indicator of increased volatility and nervousness among market participants, as operators build increased risks into their margins in anticipation of further euro appreciation.

The rise in the market’s premium to the official exchange rate clearly indicates the formation of strong expectations of further euro appreciation, which the market is trying to play ahead of the curve.

At the same time, the gap between market quotes and the NBU’s official exchange rate is widening, lagging behind market dynamics. FX market operators are responding more quickly to the information and economic background, which play in favor of the euro’s appreciation against the dollar.

Ø In the short term (2-4 weeks), the euro is likely to consolidate in the range of 46-47.50 UAH/€ with potential short-term corrections after a rapid rise.

Ø In the medium term (2-4 months), in the event of positive signals from the EU or further dollar weakness, the euro is likely to test higher levels of 48-49 UAH/€.

Ø In the long-term horizon (6+ months), the euro has clear structural advantages: a growing share in imports, growing popularity as a savings instrument, and global financial restructuring shifting the focus from the dollar to the euro.

Ø Given the dynamic and conflicting information in this issue , we will refrain from providing a long-term outlook for the euro in absolute terms, although we emphasize that the euro/hryvnia pair remains one of the most sensitive and volatile, requiring constant increased attention from businesses and investors when planning their currency structure.

Recommendations for businesses and investors

Given the dynamic situation in the current review, we will divide the recommendations into two separate blocks:

Ø basic recommendations – to help avoid exchange rate risks or minimize losses;

Ø updated recommendations – to help guide you in revising your investment and savings strategies.

Basic recommendations that remain relevant:

Diversification of the currency portfolio is a basic strategy.

The euro demonstrates volatility and growth potential, while the dollar is weak amid global events. It is recommended to keep part of your assets in euros, especially if you have corresponding liabilities. The dollar is a short-term liquidity and hedging instrument.

Maximum liquidity is an absolute priority.

All foreign currency assets should be readily available for operational maneuvering – this is a key condition given global turbulence and political risks.

To keep the hryvnia within its functional scope.

The hryvnia remains stable, but the inflationary backdrop and potential exchange rate risks in the second and third quarters of 2025 do not allow holding a large hryvnia surplus. If possible, avoid tying up hryvnia liquidity in instruments with fixed maturities or without the possibility of revising yields.

Updated and supplemented recommendations

Changing the share of currencies in the portfolio: smooth migration from the dollar to the euro.

It is advisable to gradually rebalance the portfolio towards the euro. It is increasingly used in settlements and potentially provides a better exchange rate premium.

Have a safety margin and hedge your bets.

Buffers should be set aside for forward exchange rate fluctuations that are likely to occur against the backdrop of a sustained surplus of imports over exports and the risks of a slowdown or reduction in the country’s external financing.

Currency speculation should be handled with a high level of caution.

Current market volatility, especially in the euro/hryvnia pair, carries increased risks. Speculation is possible only for experienced players with access to fast and profitable instruments on terms more favorable than standard market ones.

Scenario planning in a long-term strategy.

The global economic landscape is changing rapidly, and even if it stabilizes, it will continue to look for new equilibrium points for a long time. Refuse to rigidly fix currency targets for long horizons and plan alternative investment and savings scenarios in advance.

This material was prepared by the company’s analysts and reflects their expert, analytical professional judgment. The information presented in this review is for informational purposes only and cannot be considered 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 assessment 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.