The purpose of this review is to analyze the current situation in the Ukrainian foreign exchange market and forecast the hryvnia exchange rate against key currencies. The current conditions, key factors of influence, and possible scenarios are considered.
Analysis of the current situation
In recent months, the national currency of Ukraine has experienced a gradual controlled devaluation. We see such actions as an attempt to achieve several strategic goals to support the economy and the budget:
Ø The appreciation of the hryvnia to realistic values – this ensures the gradual adaptation of the economy to the new macroeconomic and exchange rate reality without shocks.
Ø Agricultural export season: controlled and gradual devaluation helps to increase the income of farmers, who will receive more hryvnia for their exported products.
Ø Budget support: controlled gradual devaluation becomes a tool for balancing the budget by increasing revenues from customs duties, excise taxes, and other taxes denominated in hard currency. This makes it possible to avoid a direct increase in the tax burden on business or even partially replace it in the face of the government’s controversial tax reform package.
Ø As we predicted in our previous review, the hryvnia exchange rate against the dollar has found a temporary equilibrium at a conditional plateau around UAH 41/$, where it has been fluctuating slightly since the second decade of August.
In addition, our expectation of stabilization of foreign exchange reserves came true due to the inflow of support funds from partners and allies: according to the NBU, foreign exchange reserves increased by USD 5 billion after a four-month decline. Ukraine received the following funds:
Ø USD 4.553 billion from the EU under the Ukraine Facility program;
Ø USD 3.899 billion – a grant from the US through the World Bank.
Significant amounts of international assistance exceeded the NBU’s foreign currency sales. These funds will support exchange rate stability and play an important psychological role in maintaining the stability of the foreign exchange market.
Thus, we do not yet see any objective prerequisites for the destabilization of the dollar against the hryvnia. The cash foreign currency market is also showing signs of saturation: in 7 months of 2024, according to the NBU, banks brought a record amount of cash to Ukraine – the equivalent of USD 8.8 billion, where the US dollar dominates.
The saturation of the market with the supply of dollar cash should help to keep the exchange rate stable, except in a subjective situation – if banks want to speed up the sale of currency and try to create artificial demand.
This month, we will highlight the short-term outlook for the euro against the hryvnia, as the EU currency has its own specific drivers. The continued rally of the euro amid the stabilization of the US dollar against the hryvnia is dictated by external reasons beyond Ukraine’s control: the US monetary authorities are signaling further monetary easing and lower interest rates, which is weakening the dollar’s position in international markets. At the same time, the European Central Bank has not yet given any clear signals on interest rates, which supports the euro’s appreciation against the dollar. Therefore, in the short term, we can expect the euro to continue its upward trend against the hryvnia until clear signals from the ECB appear, which will bring certainty to the further behavior of the EUR/USD pair on international markets.
Forecast.
Short-term – for the coming months:
Given the current situation and provided that the current conditions persist, we maintain our forecast for a relatively stable hryvnia exchange rate with minor fluctuations and its temporary retention at a conditional plateau in the chart near the values of UAH 41-41.5 per dollar.
Ø In the event of a controlled deterioration of key factors or a strengthening of the exchange rate component as a tool for filling the budget, the hryvnia will drift smoothly to UAH 42-43.50 per dollar.
Long-term forecast (for a year and beyond)
As a forecast beacon, the parameters of the budget declaration, which is realistic given the current situation and a restrained forecast of its development, remain relevant, where the average annual hryvnia exchange rate is projected at
Ø 2025: 45 UAH per dollar;
Ø 2026: 46.5 UAH per dollar;
Ø 2027: UAH 46.4 per dollar.
Important factors of exchange rate stability are still factors outside the economy: the situation at the frontline and the intensity of mobilization, the severity and intensity of infrastructure and energy challenges, and the scale and regularity of international support. These non-economic factors play the role of fundamental factors in the stability of the national currency.
Recommendations and conclusions:
We maintain our buy recommendation on currencies for medium- and long-term savings and investments with a horizon of a year or more.
We do not recommend buying the US dollar for short-term purposes, given the suspension of the “exchange rate rally” with temporary stabilization and/or the likelihood of an exchange rate adjustment towards strengthening the national currency against the US dollar. In contrast, the euro remains attractive for short-term investments to obtain an exchange rate premium due to its continued smooth growth.
Financial market operators are betting that the “exchange rate rally” against both the dollar and the euro willstop – the average buying rate for both currencies by financial market operators is closer to the official exchange rate of the National Bank of Ukraine, while the selling rate is significantly higher – a clear indication that financial operators want to earn a hype premium by selling currency without buying it too expensive. A noticeable widening of the spread between the official and market buy/sell rates will be a clear indication that financial operators are betting on the start of a new protracted phase of the national currency devaluation.
Therefore, we recommend that you be careful when conducting foreign exchange transactions and not be influenced by information noise.
The banking system as a whole and the NBU have sufficient tools to maintain exchange rate stability. A noticeable shift in the situation may be caused by changes in exchange rate policy or events on international markets.
Among other reasons, the broader factors outlined in the previous forecasts remain relevant, including
Ø administrative actions aimed at further devaluation of the national currency;
Ø currency exchange regulations, which may become a driver of the shift to cash;
Ø uncertainty in mobilization and employment;
Ø uncertainty about the consequences of the revision of tax rates and fees for businesses of various sizes;
Ø infrastructure and energy challenges expected in the autumn-winter season, which may become powerful drivers of a deteriorating business climate and a new wave of seasonal emigration.
Despite Russia’s war against it, Ukraine intends to export 60-65% of its harvest in the 2024-2025 marketing year (MY), Minister of Agrarian Policy and Food Vitaliy Koval said during a national telethon.
“The main issue facing the government is to ensure the country’s food security. At the same time, we plan that Ukraine will export about 43 million tons (of agricultural products – IF-U) to foreign markets,” he said.
Koval specified that wheat exports are expected to reach 16.2 million tons, and corn – about 25 million tons. Ukrainian processors will be provided with wheat, and the surplus is already being exported.
“Today, the agricultural sector accounts for about 60% of the country’s total export revenue. It is very important that foreign markets receive Ukrainian products. And not only agricultural raw materials, but also value-added products and processed products. It is very important that these percentages grow. It is also important that the amount of harvested crops that we can export does not remain in the country and that exports grow,” the Minister of Agrarian Policy summarized.
88% of weapons in the register since the beginning of the full-scale war have been lost
More than 270,000 weapons have been lost or stolen since the beginning of the full-scale war in Ukraine. This is 40% of the total number of stolen and lost weapons in the registry. More than 78 thousand weapons have been lost and stolen since the beginning of the year. The most frequent places where weapons are lost are Donetsk, Zaporizhzhia and Kyiv.
270,945 weapons have been lost and stolen in Ukraine since the beginning of the full-scale invasion. This is 40% of the total number of weapons listed in the register of stolen or lost weapons.
This year, the number of lost and stolen weapons has increased: in less than 2024, more weapons were stolen or lost than in the whole of last year – 78,217 units. At the same time, this is 4 times more than before the full-scale campaign.
The largest number of weapons was registered in 2022 – 116,687 units.
Hunting rifles (27.9%), assault rifles (27.8%), and carbines (10.8%) are the most commonly lost weapons. Among the models, the AK-74 rifle is the most popular – 51,008 units (18.8%), followed by PM pistols (7.4%) and SKS carbines (4.4%).
The highest losses were recorded in the frontline Donetsk (19.4%) and Zaporizhzhia regions (11.8%), as well as in Kyiv (10%).
The vast majority of weapons in the registry have been lost since the start of the full-scale war – 88%. Only 12% of the weapons in the registry were stolen.
Context.
As a reminder, in August 2024, the President signed Bill No. 9538, which grants civilians the right to declare, own, and use found firearms and ammunition to defend themselves against Russian armed aggression.
Ukrainians will be able to use the declared trophy weapons during martial law and 90 days after its end.
https://opendatabot.ua/analytics/weapon-wanted-2024
Low demand for apples and increased supply of these fruits of autumn varieties are forcing Ukrainian gardeners to reduce selling prices in this segment, according to analysts of the EastFruit project. It should be noted that this trend has been observed on the Ukrainian market for the third week in a row.
Thus, currently, high-quality varietal apples go on sale at a price of 12-18 UAH/kg ($0.29-0.44/kg), which is on average 15% cheaper than at the end of the last working week.
As of today, apples of autumn varieties that are not suitable for storage are mostly on sale, so growers are trying to sell them as a matter of priority and reduce the cut-off prices for these products.
It should be noted that as of today, the price of apples in Ukraine has actually dropped to the level of prices in the same period last year. For more information on the development of the apple market and other fruit and vegetable products in Ukraine, please subscribe to the operational analytical weekly– EastFruit Ukraine Weekly Pro. More information about the product is available here.
Source: https://east-fruit.com/novosti/tseny-na-yabloki-v-ukraine-prodolzhayut-snizhatsya/
After the launch of the online order delivery service Varus.ua via Nova Poshta in August, the average check increased by 55.14% and turnover by 50.57%, the retailer’s press service reports.
It is specified that the delivery service from Varus.ua is available to any city in Ukraine, and it is actively used in areas where there are no physical stores of the Varus chain.
In August, the top new regions where online orders were made were: Rivne, Lviv, Kirovohrad, Kharkiv and Donetsk regions. In the regions where the chain is present, the highest number of orders was made in Kyiv, Odesa, Dnipro and Zaporizhzhia regions.
The new service from Varus.ua can be used when ordering long-term storage products and non-food products, with a maximum order weight of 50 kg. Among the most popular products ordered by Varus.ua customers with delivery via Nova Poshta in August were snacks, pet products, beverages, tea, and coffee.
The cost of delivery is calculated according to Nova Poshta’s tariffs, and the estimated time for order picking and delivery is one day for most Ukrainian cities.
Varus is a national supermarket chain represented on the Ukrainian grocery retail market by Omega. The authorized capital of Omega is UAH 111 million 129 thousand, the owner is Weigant Enterprises Limited (Cyprus), the ultimate beneficiaries are Valeriy Kiptyk and Ruslan Shostak. In 2023, Omega’s revenue amounted to UAH 17.51 billion, which is 20% higher than in 2022, and net profit amounted to UAH 200 million, which is 69.5% higher than in 2022.
The first store of the chain was opened in 2003 in Dnipro, and the total number of its stores is 109 in different cities of Ukraine and a DarkStore in Kyiv. The chain operates in several formats: classic supermarkets, To Go stores, and the varus.ua conscious shopping service.
“Nova Poshta is the largest logistics operator in Ukraine. From the beginning of 2024 to the end of July, the company expanded its network in the country from 26.6 thousand to 30.1 thousand points: up to 12.1 thousand branches and 18 thousand post offices. As reported, in Ukraine, Nova Poshta LLC increased its unconsolidated net income in the first half of 2024 by 20.1% to UAH 20.12 billion, while the company’s net profit decreased by 38.1% to UAH 1.49 billion.
In January-August 2024, Ukrzaliznytsia JSC (UZ) increased its cargo transportation by 24.3% compared to the same period last year, to 118.04 million tons, according to an analytical note prepared for a meeting of the Exporters’ Office on Wednesday.
The volume of cargo transportation in August 2024 increased by 15.5% compared to the same period in 2023 (1.9 million tons), amounting to 14.18 million tons, which is 4.2% more than in July 2024.
“Massive missile attacks have significantly affected the state of the energy sector, certain industries, and transport infrastructure, which affects the dynamics of cargo transportation,” the analytical note says.
The volume of export transportation in January-August increased by 65.8% to 57.74 million tons. According to the results of eight months of 2024, the share of cargo exports in the total volume of transportation amounted to 49% compared to 37% in the same period of 2023.
In August 2024, the volume of cargo transportation for export amounted to 6.58 million tons, which is 2.8% more than in July 2024. At the same time, compared to August 2023, when 3.3 million tons were exported, the volume of cargo transportation for export doubled.
The volume of exports through land crossings in January-August decreased by 6.9% year-on-year to 21.31 million tons. As of August 2024, the volume of cargo exports via land crossings amounted to 2.5 million tons, which is 2.4% less compared to July 2024.
In January-August, the volume of cargo exports via ports increased 3.1 times to 36.42 million tons. As of August 2024, the volume of cargo exports to ports amounted to 3.9 million tons, which is 6.5% more than in July 2024.
In January-August, 92.3% of all rail transportation to ports was accounted for by the ports of Greater Odesa, and 7.7% by the Danube ports.
Grain remains the leader in exported cargo, with a volume of 2.63 million tons in August, accounting for 40.1% of the total. Iron and manganese ore came in second place at 2.32 million tons (35.3%), followed by ferrous metals at 0.57 million tons (8.6%). Construction materials accounted for 0.48 million tons (7.2%), ranking fourth in total cargo exports in August, the company said.
“The metallurgical and agricultural sectors retain the status of the basis of Ukrainian exports in the current environment. Sea routes remain the main channel for supplying Ukrainian goods to foreign markets,” the note says.
Earlier, Yevhen Lyashchenko, Chairman of the Board of Ukrzaliznytsia JSC, said that the company suffered losses of UAH 600-700 million in July-August and expects a small loss by the end of 2024, despite profitable operations in the first half of the year. According to him, this was due to the lack of profitable cargoes that provide a safety margin.
