Issue No. 1 – December 2024
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 the current conditions, key influencing factors, and possible scenarios.
Analysis of the current situation
The Ukrainian foreign exchange market is experiencing a growing shortage of foreign currency, driven by high demand in both the cash and non-cash segments. The National Bank of Ukraine stabilizes the market with interventions that cannot fully satisfy the demand for foreign currency, but at the same time achieve the goal of stabilizing the market, which prevents abrupt dynamics and allows for a smooth devaluation trend.
Increased demand for foreign currency in both segments of the market is typical for the beginning of the month and the end of the year.
Statements and steps taken by Ukraine’s international partners to provide further funding from frozen Russian assets, infrastructure support, and economic stimulus projects do not give rise to pessimistic exchange rate forecasts.
However, changes in tax policy, in particular to increase the tax burden on deposit income, may become a new powerful driver of demand for foreign currency and pressure on the hryvnia exchange rate from the population, as well as the flow of foreign currency savings from the formal financial system into cash, while banks cannot offer attractive rates that would offset the risks of new steps of administrative intervention by the state in regulating foreign exchange transactions for the population.
A characteristic feature of recent weeks has been the widening of the spread between the buying and selling rates of the most popular currencies among Ukrainians, the euro and the dollar. This indicates that foreign exchange market operators are seeking to capitalize on the increased demand for cash currency among households, and the widening spread between the bid and ask rates allows foreign exchange market operators to compensate for their own risks amid an unpredictable exchange rate environment.
Dollar exchange rate forecast
Short-term forecast
In the short term, the hryvnia exchange rate against the dollar will remain in the range of UAH 41.7-42/$, with a tendency towards UAH 42.5/$. Quotations close to 42 UAH/$ were already recorded in early December, which is in line with our exchange rate expectations for the end of this year. At the same time, seasonal factors, such as increased demand for foreign currency at the end of the year, may cause a slight short-term surge to the level of 42.5 UAH/$.
Medium-term forecast
The dollar is likely to reach UAH 42.2-42.5/$ by the end of 2024, given the traditional increase in demand for foreign currency in December. Among the external factors, the main one is the monetary policy of the US Federal Reserve, which will affect the dollar’s position in the global market, and this will be reflected in the dynamics of the hryvnia exchange rate, which will still drift smoothly to the value of 45 UAH/$, which is the basis for the state budget for 2025.
Euro exchange rate forecast
Short-term forecast
The euro remains under pressure on the international market due to expectations of ECB rate cuts. In Ukraine, this was reflected in the stabilization of the hryvnia exchange rate against the euro at UAH 43.6-44.3/€. Given the absence of local drivers, the exchange rate will remain within these limits with a potential slight decline in the near future.
Medium-term outlook
Over the next few months, we expect the euro to gradually rise to UAH 47-48/€, driven by a possible easing of the ECB’s monetary policy. However, the euro’s strengthening will also largely depend on the success of the eurozone’s economic recovery and global trends. The dynamics of the euro against the hryvnia will largely reflect these trends in the Ukrainian market, as there are no internal influential fundamental drivers of the euro exchange rate in Ukraine, only situational ones.
Key factors affecting the foreign exchange market
Recommendations for businesses and investors
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 are not responsible 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 make informed decisions based on their own assessment and analysis of the situation from various available sources that they themselves consider sufficiently qualified. We recommend that you consult an independent financial advisor before making any investment decisions.
REFERENCE
KIT 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. KIT Group is one of the largest operators of this segment of the financial market of Ukraine, is included in the list of 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. KIT Group adheres to EU standards, having a branch in Poland and planning cross-border expansion to European countries.
Photo: Kyt_group_dec
Source: https://en.interfax.com.ua/news/projects/1033647.html
