Commodity pattern of foreign trade of ukraine (export), jan–apr, 2019
Top-20 countries with which ukraine has most favorable balance in jan–apr, 2019
The hryvnia will continue strengthening in the short term, according to bankers polled by Interfax-Ukraine. “It is likely that soon we will see UAH 25.5 per $1,” senior analyst at Raiffeisen Bank Aval Mykhailo Rebryk has said. According to him, the main factors of the observed strengthening of the hryvnia exchange rate are sales of currency by non-residents for the purchase of government domestic loan bonds and seasonal sales by large exporters of currency earnings from the sale of a new crop.
Rebryk believes that fundamental risks for the hryvnia exchange rate in the short term are insignificant.
“The trade balance had a slight deficit in May, EUR1 billion from eurobond placement in June is likely to cover the cumulative deficit of the financial account, and on the current account receipts from labor migrants cover trade deficit,” he said.
The expert believes that the parliamentary elections in July will not significantly affect the hryvnia exchange rate.
“Given the fact that sociological ratings accurately reflected the situation in the run-up to the presidential elections, we can expect that the results of parliamentary elections will generally correspond to the results of polls. And what is predictable, it is laid down in the expectations of market participants. Therefore, we do not expect a significant impact of the election results on the market,” he said.
At the same time, according to Rebryk, the further expansion of the trade deficit and peak payments on the state debt in September will create certain fundamental prerequisites for weakening the hryvnia exchange rate by the autumn.
Director for Treasury at Bank Credit Dnepr Oleh Kurinny said that in the absence of economic and political shocks, the hryvnia exchange rate in July will be in the range of UAH 25.90 – 26.40/$1. According to him, further exchange rate trends will be determined by the vectors of foreign, economic and monetary policies, the course of the parliamentary election campaign and cooperation with international financial institutions, the level of investor interest in government bonds, world commodity and stock market conditions, the volume of export income and earnings from labor migrants.
“Seasonal factors, of course, have a certain impact on the volume and structure of export-import transactions, but it is not fatal and can be partially minimized by the effective preventive actions of the regulator in the field of monetary policy and linking hryvnia liquidity,” he added.
According to Kurinny, the key factors that contributed to the strengthening of the hryvnia exchange rate below the psychological mark of UAH 26/$1 were: the preservation of the NBU key policy rate in June at 17.5% as a signal of maintaining high yield of government bonds and deposit certificates – tools of hryvnia liquidity; the results of the latest auctions of the Finance Ministry on placement of government bonds, which confirmed interest in Ukrainian securities, having an additional stabilizing effect on the mood of market players and increasing the supply of currency; complete abolition of the mandatory sale of foreign currency income by the business; the continued seasonal prevalence of currency supply in the cash market; active participation of the regulator with the purchase of surplus foreign currency supply, smoothing exchange rate dynamics, but supporting the general revaluation trend.
Official rates of banking metals from national bank as of july 5
One troy ounce=31.10 grams
National bank of ukraine’s official rates as of 05/07/19
Source: National Bank of Ukraine
The portfolio of government domestic loan bonds held by non-residents as of July 4 reached a new historical record high of UAH 60.12 billion at face value, including an increase of UAH 2.71 billion following the results of primary auctions conducted on July 2.
According to data released by the National Bank, the entire increase was traditionally provided by hryvnia securities, by UAH 3.91 billion, which total UAH 58.21 billion in the portfolio held by non-residents.
Such an inflow of funds from non-residents allowed the National Bank to buy out $52 million in the market after primary auctions on July 3, although the hryvnia exchange rate strengthened and for the first time since April 2018 it overcame the level of UAH 26/$1.
A week earlier, the portfolio of government bonds owned by non-residents grew by UAH 4.79 billion, but then a small part of it (UAH 390 million) was secured by equities in U.S. dollars.
In general, since the beginning of 2019 the portfolio of government bonds owned by non-residents has increased by UAH 53.77 billion, or 9.5 times.
