Issue No. 1 – May 2026
Analysis of the current situation in Ukraine’s foreign exchange market
In May, volatility in Ukraine’s foreign exchange market decreased significantly, and the hryvnia strengthened. There was no high demand for foreign currency in April, and in May, no increase in interest in foreign currency was observed either in the interbank market or in the cash segment.
The state budget is being replenished thanks to large tranches from partners, which supports the currency market, although “black swans” in the form of short-term setbacks toward a weaker hryvnia cannot be ruled out. The National Bank of Ukraine, as the main market maker in the foreign exchange market, is keeping a close eye on the situation, so no unpredictable exchange rate spikes are expected in May. However, tensions in the foreign policy arena, oil market prices, and Ukraine’s relatively high demand for imported petroleum products will influence the exchange rate trajectory of both the dollar and the euro.
Global Context
At the end of April, the Federal Reserve Committee left the benchmark interest rate unchanged for the third consecutive meeting, citing heightened economic uncertainty due to events in the Middle East as the reason for this decision. The Committee’s next meeting will take place in mid-June. Currently, traders expect the Fed to be forced to raise rates as inflation in the U.S. rises. According to the latest report, the Consumer Price Index rose by 0.6% on a seasonally adjusted monthly basis in April, representing a 3.8% annual rate and the highest level since May 2023. Excluding food and energy, the core CPI rose by 0.4% and 2.8%, respectively, keeping inflation well above the Federal Reserve’s 2% target.
Overall, the U.S. economy, which is at war with Iran, is showing decent growth rates. U.S. gross domestic product reached 2% from January through March, according to the U.S. Department of Commerce. And although the figure is below the forecast of 2.3%, economic growth is still noticeable and is driven by steady consumer spending, a surge in business investment, increased exports, and government spending.
Tensions in the Middle East remain high, and the U.S. and Iran have yet to reach a common peaceful position. Moreover, as early as May, U.S. President Donald Trump criticized Iran’s latest peace proposal, calling it “unacceptable.” Meanwhile, the Strait of Hormuz remains blocked to oil tankers, which is significantly heating up the oil market and driving up prices. However, the price of Brent crude has since fallen from its peak levels (in April, prices rose to $120 per barrel), and as of May 14, market prices are in the range of $104.8–105.4 per barrel. Meanwhile, OPEC has released a new forecast, according to which global oil demand in 2026 will grow by a “robust” 1.2 million barrels per day (bpd). OPEC also believes that in 2027, global oil demand will grow by approximately 1.5 million barrels per day, which effectively represents an upward revision of about 200,000 barrels per day compared to OPEC’s forecast released in April.
Traditionally, the dollar is influenced by the Fed’s stable policy on the one hand and the destabilizing factors of the war in Iran and the oil storm on the other. However, the fluctuations do not follow panic-inducing trajectories, and the dollar is strengthening against the euro in May: by mid-month, the EUR/USD exchange rate stands at 1.1640.
Domestic Ukrainian Context
In the first half of May, demand for foreign currency on the Ukrainian currency market declined significantly. While the average weekly currency sales on the interbank market in April amounted to $817 million, the NBU sold $783.6 million on the market during the first week of May. The drop in demand and the NBU’s willingness to sell currency were the main factors influencing the exchange rate: the hryvnia strengthened. If we compare the exchange rate at the beginning of May and in the middle of the month, the rate has effectively remained unchanged—standing at 43.96 UAH per dollar.
In tandem with the interbank market, the cash market in May is also being influenced by weakened demand for dollars and euros. This trend has been ongoing since April, when, according to NBU data, the public purchased $1.22 billion in cash dollars—$325.8 million less than in March—while dollar sales decreased by $19.9 million to $1.49 billion. Overall, last month, purchases of foreign currency decreased by $598.8 million to $1.79 billion, while sales of foreign currency increased by $1.2 million to $1.42 billion.
As expected, international reserves declined in April: according to the NBU, preliminary data as of early May showed them at $48.21 billion. In April, reserves fell by 7.3%. According to the NBU, this trend is explained by the National Bank’s currency interventions and the country’s debt payments in foreign currency—the NBU sold $3.57 billion in April.
The foreign exchange market is being supported by financial aid from Ukraine’s partner countries. In April, Ukraine received the final tranche from the United Kingdom in the amount of 752 million pounds sterling (approximately $1 billion) under the G7 ERA initiative. The seventh tranche of aid to Ukraine through the Ukraine Facility mechanism is scheduled for June, amounting to 2.8 billion euros. Also in June, Ukraine may receive the first tranche under the 90-billion-euro loan program from the European Union. The state budget is expected to receive 3.2 billion euros as a result. There is a possibility that part of the funds under the IMF’s Extended Fund Facility program will also be received in June, with the tranche amounting to $686 million. However, final approval of the tranche is contingent upon the first review of the program, which is scheduled for June. Previously, the main issue hindering approval was tax policy, specifically the VAT for sole proprietors and the taxation of parcels.
US Dollar Exchange Rate: Trends and Analysis
In May, the foreign exchange market has been calm and stable, at least as demonstrated by the first half of the month. As of May 1, the official exchange rate was 43.96 UAH/USD; on May 8, the rate dropped slightly to 43.98 UAH/USD, and on May 14, it returned to 43.96 UAH/USD. As a reminder, the interbank rate at the end of April was within the range of 44.06–44.11 UAH per dollar, and in mid-May—within the range of 43.95–43.99 UAH/USD. The National Bank is fulfilling requests to buy currency, and no panic buying is observed.
The cash market, like the interbank market, has not shown any sharp fluctuations, as demand has significantly decreased. As of mid-May, the buying rate for cash dollars is 43.60–43.75 UAH/USD, and the selling rate is 44.15–44.30 UAH/USD. Spreads between rates in May remained unchanged at 0.4–0.55 UAH/USD.
Key influencing factors:
· Decrease in exchange rate fluctuations in May. Following April, May saw a decline in demand for foreign currency, and the NBU is meeting importers’ requests.
· The cash market is not experiencing a rush of demand. There is a noticeable stabilization in the cash segment; the public is selling dollars more often than buying them.
· International factors: the war in Iran continues to affect global investor sentiment, while the Fed is awaiting updated data on inflation and the labor market to make a decision on changing interest rates. Meanwhile, the dollar has strengthened slightly, but the U.S. currency lacks stable support.
· Market expectations: support for Ukraine from international partners and weakening demand for the currency offer hope for a stable May for the hryvnia, and possibly the first month of summer as well. However, the risk of devaluation fluctuations cannot be ruled out. A stable exchange rate is a signal to increase the share of dollar-denominated savings before the rate crosses the 44 UAH/USD threshold again.
Forecast
· Short term (1–2 weeks): base range of 43.98–44.15 UAH/USD, with possible fluctuations in either direction, but without unpredictable spikes.
· Medium term (2–3 months): 44.15–44.65 UAH/USD. The war in Iran is weakening the dollar’s position in the international market, and until a peace agreement is reached between Washington and Tehran, the strengthening of the U.S. currency may be slow and sporadic.
· Long term (6+ months): the baseline scenario is a devaluation of the hryvnia to 44.7–45.7 UAH/$. Despite massive multi-billion-dollar support for Ukraine from its partners, the trade balance is critically skewed toward imports, which puts pressure on the exchange rate and makes the market completely dependent on the main market maker—the NBU. The situation on the front lines, the extent of damage from large-scale attacks on infrastructure, global oil prices, and the replenishment of international reserves will be key factors for the Ukrainian currency market and the pace of exchange rate fluctuations.
Euro exchange rate: dynamics and analysis
Not only did the dollar show stability in the first half of May, but the euro did as well. Since fluctuations in the international market were slow and very insignificant, the euro in Ukraine had no chance of sharp rises or falls. Thus, the month began at 51.46 UAH/EUR, and by mid-May the rate stood at 51.44 UAH/EUR.
No surprises were observed in the cash market.
In early May, the buying rate stood at 50.95–51.4 UAH/EUR, and the selling rate was around 51.75–52.10 UAH/EUR. Two weeks into May, the buying rate was 51.1–51.4 UAH/EUR, and the selling rate was 51.65–51.95 UAH/EUR.
For most cash market participants in May, spreads remained unchanged compared to April levels and stood at 0.45–0.6 UAH, but at some banks, spreads rose to 0.7–0.9 UAH/EUR.
Key influencing factors:
· On the international market, the euro holds a strong position against the dollar: although the dollar continues to trend toward strengthening, the euro has held a stronger position in both April and May, and exchange rate movements are most significantly influenced by global uncertainty regarding the war in Iran.
· In the EU, inflation is rising significantly due to the situation in the oil market. According to the ECB, every 14% increase in oil prices adds 0.5% to the inflation rate, and inflation is expected to reach 2.6% in 2026, while the ECB’s target forecast is 2%. As a result, the ECB plans to raise interest rates, which could undermine the euro’s strong position.
· Demand for the euro in Ukraine remains subdued. There are no major fluctuations in the cash market, and amid the exchange rate stability seen in May, citizens are selling euros more often than buying them.
Forecast
· Short term (2–4 weeks): on the Ukrainian market, the euro may remain within the range of 51.55–51.90 UAH/€.
· Medium term (2–4 months): depending on the policies of the ECB and the Fed, the euro may strengthen to 52.55 UAH/€.
· Long-term (6+ months): The euro exchange rate may remain within the range of 52.40–53.80 UAH/€. Key influencing factors will include the situation in the Middle East, oil prices, and decisions by the central banks of the EU and the US regarding changes to the key interest rate.
Recommendations for Businesses and Investors
Global politics is driving exchange rate trajectories. Negotiations between the U.S. and Iran have currently reached an impasse, and rising oil prices are fueling inflation in both the U.S. and energy-dependent Europe. Under these conditions, it is advisable to keep a “cool head” and prioritize reliable instruments.
The U.S. dollar is strengthening due to expectations of peace in the Middle East and an upcoming Fed rate hike. It is worth preparing for possible changes and having several currency scenarios ready for different periods and with different weightings of major currencies.
Investment security is the focus. The absence of significant market fluctuations can lead to rash decisions. However, the most important thing is to stick to your own strategy and pay attention to the details; the priority is preserving your savings, not making a quick profit.
The U.S. economy continues to grow rapidly, and the dollar is one of the world’s major currencies. The dollar’s liquidity is beyond question, so the share of dollar-denominated investments in the portfolio should be the largest.
Portfolio diversification—cautious and well-thought-out. Unpredictable geopolitics can throw even the most experienced investors off course. Therefore, when formulating a reliable strategy, it is best to stick to the major currencies—the dollar and the euro. However, this does not mean that you should not occasionally add other liquid currencies, including the British pound and the Swiss franc.
Gold is falling in price, but this is not a signal to buy. Amid the lack of news regarding a peace agreement between Tehran and Washington and due to high key interest rates, gold has lost 3% over the past month, reaching a price of $4,690 per ounce. However, adding gold to a portfolio only makes sense if prices continue to fall further.
Oil is gradually getting cheaper, but not enough to support the dollar. In mid-May, Brent crude fell to $104.3 per barrel. However, over three months, the price increase amounted to nearly 54%. Currently, all signs point to a strong euro, and there are reasons to maintain this asset in a balanced portfolio comprising at least 25% of savings in foreign currencies.
The NBU’s discount rate remains at 15%. This means no increase in returns on term deposits and a greater role for foreign currency savings. According to the NBU, inflation in 2026 will be 9.4%. However, there is a very high probability that this forecast will be exceeded, given the significant rise in fuel prices and other goods and services.
Buying dollars is a safe investment. Although the interbank and cash markets are calm for now, the devaluation trend could intensify as early as next month. Now is the best time to buy dollars for a balanced portfolio.
What’s important in the news. The most significant developments are unfolding in global markets—the currency and oil markets. However, it’s also worth monitoring changes in key interest rates in the U.S. and the EU, which could provide support for the dollar or the euro. In the domestic market, the main focus is on reports regarding international reserves, the receipt of tranches from partners, and the IMF’s approval of funding under the new four-year program. Unpredictability both on the global stage and within Ukraine dictates that investors stay focused on what matters most and act cautiously, taking all possible risks into account.
This material was prepared by analysts at KYT Group, an international multi-service product FinTech platform, and reflects their expert, analytical, and professional judgment. The information presented 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 regarding timeliness, or updates or supplements.
Users of this material should independently assess risks and make informed decisions based on their own evaluation and analysis of the situation using various available sources that they themselves deem sufficiently qualified. Before making any investment decisions, we recommend consulting with an independent financial advisor.
REFERENCE
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