Issue #2 – September 2025
The purpose of this review is to provide an analysis of the current situation on the Ukrainian currency market and forecast 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 on the currency market
International context
The first half of September was marked by expectations of decisions by the world’s leading central banks. In the United States, markets were expecting policy easing at the beginning of the month: inflation rose only slightly, and the labor market showed a gradual cooling. This prompted investors to lay a high probability of a rate cut by the Federal Reserve. As a result, the dollar weakened, while the euro recovered even without its own drivers, only due to pressure on the US currency.
The European Central Bank, for its part, left its policy unchanged: inflation is stable at around 2%, the economy is growing slowly, and there are no new reasons for the euro to break out. Oil and gas prices remained in relative balance in August-September, creating no additional risks or opportunities for the EU currency.
The key external factor for the FX markets in the coming weeks will be further signals from the Fed and the ECB.
New data on inflation and the US labor market remain key benchmarks for the Federal Reserve. If the rate of price growth remains within forecasts and employment continues to cool, this will strengthen the case for easing policy in the near future. On the contrary, a sudden jump in prices or unexpectedly strong employment figures could force the Fed to wait and take its time with rate cuts.
For the European Central Bank, the main benchmarks remain inflation in the eurozone and the growth rates of the economies of Germany and France. If inflation continues to hover around 2%, the ECB will maintain a pause. Any acceleration of inflationary processes could become a brake on further money depreciation.
Thus, in the coming weeks, it will be the macro data from the US and the EU that will determine sentiment on the global FX market. For the hryvnia, this means that the dollar and euro exchange rates against the national currency will remain influenced by external signals rather than internal factors.
If the US confirms its course for a new wave of easing, the dollar will lose some more support, and the euro may strengthen further. If the Fed decides to keep rates on hold longer, the dollar will get a short-term boost.
For Ukraine, this will mean that both key currency pairs (USD/UAH and EUR/UAH) will continue to fluctuate primarily in response to external signals.
Domestic Ukrainian context
The NBU continues to maintain control over the market: reserves remain at record levels, and the official hryvnia exchange rate is gradually strengthening. The cash market moves in sync with each other without deviations, and bid-ask spreads remain stable.
This confirms that in recent months, the Ukrainian foreign exchange market has maintained a balance and a kind of “exchange rate consensus” between the regulator, foreign exchange market operators, and export-import businesses.
An additional marker is the average annual exchange rate of 45.6 UAH/USD set by the government in the draft budget for 2026. This benchmark almost coincides with business expectations for the next year (46 UAH/USD) and shows the consensus of both the government and the market in the medium term towards controlled devaluation with almost flat dynamics rather than hryvnia strengthening.
There are currently no internal factors that can radically change the situation in the coming weeks. All key drivers are of external origin. If the dollar weakens globally, the hryvnia will have an additional chance to strengthen; if the dollar pulls back, the Ukrainian market will feel it very quickly.
The strategic stability of the Ukrainian currency market, as well as the economy’s ability to withstand the pressure of the war’s aftermath, is enhanced by the willingness of international partners to financially support the country, as well as intensive discussions in the EU about mechanisms for financing Ukraine with frozen Russian funds.
US dollar exchange rate: dynamics and analysis
General characteristics of market behavior
At the end of September, the dollar demonstrated a gradual upward reversal after several weeks of flat sliding. While at the beginning of the month the market was in the range of UAH 41.00-41.30/$, the last few days have been marked by a synchronized rise in both buying and selling, and the official NBU rate.
In fact, the market has moved into a correction phase, testing the upper limits of the usual range: all exchange rate indicators have moved up simultaneously, signaling that the intensity of transactions and demand are gradually increasing. Operators reflect this in their quotes. This trend is likely to continue into October, with the dollar moving smoothly along an almost flat trajectory without any sharp movements.
Despite the smooth growth of the dollar, spreads remain stable (0.40-0.50 UAH/$), which reflects the controllability of the market and the absence of sharp distortions that can dramatically change the market situation.
Key factors of influence
Forecast.
Euro exchange rate: dynamics and analysis
General characteristics of market behavior
The euro showed steady growth on the Ukrainian market in September. On a monthly retrospective horizon, quotes rose by an average of UAH 0.40-0.50 per euro.
Despite the multidirectional fluctuations in the euro, the main focus should be on the spread, which has widened significantly in relation to buying, signaling a decline in demand from the population.
Key observations
Ø Exchange rate geometry:
o The selling rate has been steadily pulling upward, laying the groundwork for further growth.
o The buying rate is moving away from the NBU’s official rate – market operators are no longer willing to buy back euros from clients at “premium” prices, as demand has declined.
Ø Supply and demand:
o Demand for cash euros has cooled significantly after the summer peak, as seen in the reduction in purchase volumes.
o The supply of euros from households remains strong, which is why purchase rates are being pushed to the lower bound.
Influence of external factors:
– The euro is supported solely by a weaker dollar, with no growth drivers of its own.
– Expectations of the Fed and ECB rate decisions in October and November remain the main risk/potential factor for the EUR/USD pair and, accordingly, for the EUR/UAH exchange rate.
Forecast.
Recommendations: dollar or euro – buy, sell, or wait?
USD/UAH
The dollar entered a corrective recovery phase at the end of September, but globally, the market has already priced in a “cheaper” dollar after the September Fed rate cut.
This means that there is limited room for a large-scale decline, and the dynamics will continue to depend on new macro data and signals from Washington.
There is no need to fundamentally shift the structure of savings in favor of the dollar at this time, as liquidity is more important than fixing the exchange rate. The best strategy is to gradually diversify your purchases in small tranches to build up a reserve.
It is advisable to sell the dollar only in the event of short upward spikes after decisions or signals from the Fed, as they can provide so-called time windows for profitable profit-taking.
For speculative operations, it is best to work with short positions and clear stops. The current corridors of 41.20-41.70 UAH/$ allow you to catch small fluctuations, but do not count on sharp jumps. Macro signals from the US or the EU can provoke short impulses that will bring benefits on quick trades.
EUR/UAH
The euro is holding steady on the Ukrainian market: sales are pulling up, while purchases are pressing against the official NBU exchange rate.
At the same time, the potential for further euro growth remains, primarily if the Fed continues to ease and the ECB is in no hurry to change its policy.
It is now possible to buy euros in small installments, especially for those planning to spend in the eurozone or diversify their portfolios. At the same time, you shouldn’t chase short-term peaks – it’s better to act in a planned manner and have liquidity to maneuver.
It makes little sense to sell the euro at current levels, as the upside potential (up to UAH 49.5-50/€ in the coming months) exceeds the risks of a pullback.
For speculative operations, the euro remains more attractive due to its higher elasticity: selling moves up, while buying stays down, creating a wider space for playing on fluctuations. To take advantage of this, you can expect the rate to rise to 49.5-50 UAH/€, and before or on the days of macro data releases, you should focus on short entry/exit trades.
Overall strategy
Now is clearly not the time to bet on one currency. Both the dollar and the euro remain influenced by external signals. The dynamics of macro data in key economies may become a trigger for the Fed and the ECB, which will determine where the exchange rate pendulum will swing next.
The basis of the strategy is to maintain liquidity and flexibility. Buy in tranches, sell only at peaks, and plan transactions in ranges rather than points.
In the medium and long term, there is a stable consensus between the government and business in favor of controlled devaluation, so the currency as a basic asset for saving savings retains its value.
This material was prepared by analysts of the international multiservice product FinTech platform KYT Group 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 warranties of completeness, obligations of timeliness or to update or supplement.
Users of this material should make their own risk assessment and informed decisions based on their own evaluation 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 platform 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 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. KYT Group adheres to EU standards, having a branch in Poland and planning cross-border expansion to European countries.
Issue No. 1 – September 2025
The purpose of this review is to provide an analysis of the current situation on the Ukrainian currency market and forecast 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 on the currency market
International context
The first half of September in the global financial markets, as well as in the Ukrainian one, was marked by the expectation of a key decision by the US Federal Reserve. The Fed chairman made it clear that policy would have to be adjusted in order not to “overstretch” the economy, which is already showing signs of cooling. Inflation rose slightly again in August, but not critically, and the labor market is gradually weakening. This has put investors on hold: whether the Fed will cut rates in September or take a break. This answer will affect not only the dollar, but also the dynamics of the euro and hryvnia, as well as gold, stock, and even cryptocurrency prices.
Against this background, Europe looks quite calm. Inflation is hovering around 2%, which is the level that the European Central Bank is targeting. There are no new reasons to raise rates, so the regulator decided not to change anything. The eurozone economy is growing very slowly, and this does not give the euro strong arguments for strengthening.
Oil and gas prices did not add to the intrigue in August and September: prices remained more or less stable, with no new peak fluctuations. This is even a disadvantage for the euro, as the absence of energy pressure removes the need for the ECB to act more firmly.
The actual Fed rate cut has not yet occurred, but the market is already living in anticipation of this step, which analysts believe is most likely. Both globally and in Ukraine, the dollar is gradually weakening precisely because investors are pricing in the high probability of a policy easing by the US central bank.
In the euro/dollar pair, the euro is recovering without any drivers of its own, thanks solely to the dollar’s weakening. In Ukraine, the dollar is also drifting downward. This means that the “cheaper” dollar is actually already taken into account in quotes. At the same time, if the Fed does cut the rate in September, the reaction may be short and moderate, as the market has already played out most of the potential impact of this scenario. But if the Fed surprises by keeping the rate unchanged, the dollar will have a chance for a short-term pullback, and the market will have to quickly revise its estimates and expectations.
Domestic Ukrainian context
In Ukraine, the situation remains under control. The National Bank has record reserves and can smooth out any surges in demand or supply of currency. The official hryvnia exchange rate is gradually strengthening, and the cash market is moving in the same direction, without sharp deviations. Spreads – the difference between buying and selling – remain stable, indicating a consensus between the regulator and the market.
The key question for the coming weeks is how the dollar will react to the Fed’s decision. If the rate is cut, the hryvnia may receive additional support, and the euro may rise slightly higher. If the rate is left unchanged, the dollar will retain its advantage, and the Ukrainian market will feel it.
The main news of the first half of September was the government’s benchmark for the dollar exchange rate included in the draft budget for 2026 – an average annual rate of 45.6 UAH/$. It is close to the expectations of the business community: according to a survey by the European Business Association, member companies include UAH 46/$ in their financial plans for 2026, which is higher than the expected exchange rate for 2025 – UAH 44/$. In general, we see a devaluation consensus in the forecasts of the Ukrainian government and business, as there are no prerequisites for a reversal.
US dollar exchange rate: dynamics and analysis
General characteristics of market behavior
September for the dollar is in a mode of smooth fluctuations with an almost flat downward trend. On global markets, the dollar has already played down most of the expectations of a possible Federal Reserve rate cut in September, and this has been reflected in the domestic Ukrainian market.
Over the past 30 days, the exchange rate has been gradually slipping downward: the average buying rate dropped from UAH 41.20 to UAH 41.05, the selling rate from UAH 41.65 to UAH 41.50, and the official NBU rate from UAH 41.35 to UAH 41.25. It was a steady and controlled decline, with no sharp impulses. In the second decade of September, the dollar remained in a narrow range of 41.00-41.30 UAH/$ on the cash market, while sales remained in the range of 41.45-41.60 UAH/$.
The NBU’s official exchange rate moves in sync with the market, anchoring the market. Bid and ask spreads remained in a narrow range of UAH 0.40-0.50, while market rates remained equidistant from the official rate, indicating that there is a “rate consensus” between the market and the regulator.
Key factors of influence
Forecast.
We advise you to pay attention to our scenario modeling of exchange rates for different actions of the Fed, which was published in the previous forecast and is available at this link.
Euro exchange rate: dynamics and analysis
General characteristics of market behavior
In the first half of September, the euro on the Ukrainian market showed restrained dynamics with a gradual shift to the upper limits of the range. During the week, bidding quotes remained in the range of 48.00-48.10 UAH/€, while asking prices were 48.65-48.75 UAH/€. On the 30-day horizon, we can see an undulating trend: a decline in late August, stabilization in early September, and a new attempt to rise closer to the middle of the month.
Specifics of the course location
A characteristic change in the “geometry” is noteworthy: the buying rate during the previous week was clearly “pressing” against the official NBU rate, while the selling rate was gradually moving away from it. At the same time, the spread between buying and selling (0.50-0.60 UAH/€) remains relatively stable. This may indicate that:
Key influencing factors
Forecast.
We advise you to pay attention to our scenario modeling of exchange rates for different actions of the Fed, which was published in the previous forecast and is available here.
Recommendations: dollar or euro – buy, sell, or wait?
USD/UAH
The dollar has already priced in a high probability of a September Fed rate cut in the domestic market. This means that there is limited room for further decline.
It makes little sense to buy at the bottom; it is better to distribute purchases in tranches without trying to catch the perfect moment.
If the Fed unexpectedly leaves the rate unchanged, the dollar may briefly play up, and this will be an opportunity for those who hold reserves to sell some of them at a profit.
For medium-term plans, the dollar remains the “anchor” of the portfolio, but now is not the time for large one-time transactions – liquidity and flexibility are more important.
EUR/UAH
The euro is showing an interesting “geometry”: the buying rate is approaching the official rate, while the selling rate is moving up. This signals a lower demand for the euro from the population, but also the caution of operators who are hedging against the risk of its growth.
It is now possible to buy euros in small tranches, especially for those who are diversifying their savings or preparing future payments to the EU.
If the Fed does cut the rate, the euro will get a boost and could quickly approach 49-50 UAH/€.
There is little point in selling the euro now, as the upside potential is higher than the downside risk.
It’s better to wait for pullbacks or new peaks to optimize the euro’s share of the portfolio.
Overall strategy
On a short-term horizon, it is worth keeping a balance: the dollar as a stable base, the euro as a flexible instrument with the potential for rebounds.
It is better to buy in installments rather than in one go.
Sell only when the market shows a tangible upward movement.
And most importantly, plan in ranges, not points: the Ukrainian market is currently reacting to external signals rather than internal events.
Given the consensus between the government and business on a managed devaluation trend, the hryvnia is the best choice for saving money in the medium and long term.
If the Fed does lower the rate, it is worth considering diversifying your investment portfolio with crypto: the global market will be attracted to risk when it gets cheaper money.
This material has been prepared by analysts of the international multiservice product FinTech platform KYT Group 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 warranties of completeness, obligations of timeliness or to update or supplement.
Users of this material should make their own risk assessment and informed decisions based on their own evaluation 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 platform 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 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. KYT Group adheres to EU standards, having a branch in Poland and planning cross-border expansion to European countries.
Despite the growing share of the euro in Ukraine’s foreign trade and international reserves, the US dollar remains the exchange rate-forming currency for the hryvnya. This was reported by the first Deputy head of the NBU Sergey Mykolaychuk in an interview with Interfax-Ukraine.
“Historically, the focus has always been on the hryvnia-dollar pair. We realize that changes are possible over time with the deepening of European integration, but there is no clear transition plan. Today the dollar remains the exchange rate-forming currency,” he said.
According to the official, the structure of reserves and settlements may change in the future, however, instruments for hedging currency risks, including forwards, are available for business.
Issue #2 – August 2025
The purpose of this review is to provide an analysis of the current situation on the Ukrainian foreign exchange 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 on the Ukrainian currency market
In the second half of August, a number of important signals from global markets confirmed that the hryvnia exchange rate increasingly depends not on local factors but on international news and the state of the world’s leading economies and the decisions of their central banks.
Domestic factors remain rather short-term impulses, capable of producing slight spikes but not changing the overall trajectory.
International context
In the United States, July data showed a slowdown in inflation and a cooling of the labor market. This took some pressure off the dollar and increased expectations that the Federal Reserve could cut rates as early as September. The Fed chairman explicitly acknowledged that the policy will have to be reviewed in order not to “overstretch” the economy. As a result, the dollar weakened slightly, and stock markets got a chance for additional optimism.
Given the expectations of the Fed’s actions regarding rate revisions, different scenarios should be considered for key currency pairs.
If the Fed cuts rates in September:
If the Fed leaves the rate unchanged:
The European economy looks sluggish: growth is almost imperceptible, inflation is stable at 2%, and there are no new drivers for the euro. This keeps the currency in a neutral mode – no reason for a breakthrough, but also no prerequisites for a sharp fall.
The UK was the first major economy to cut its interest rate. This signaled to the world that the period of tight monetary policy is coming to an end. If the United States confirms a similar move, the yield differential between currencies will decrease, and the dollar will lose some of its advantage.
Oil and gas prices remained relatively calm in August. This means that there is no additional pressure on the US and European economies due to energy. This is even more of a disadvantage for the euro, as the argument for a tighter ECB policy disappears.
In general, the international backdrop looks like this: The dollar has temporarily lost some of its support, and the euro is hovering on the sidelines.
For the hryvnia, this means relatively stable conditions.
Domestic Ukrainian context
The NBU’s reserves remain high, even after significant interventions and external debt repayments. This creates a safety margin to smooth out exchange rate fluctuations.
In July, inflation eased to 14.1% year-on-year, and the monthly figure showed deflation for the first time in two years. This calmed the market and reduced the “insurance premium” in prices.
External support is coming in as planned: at the end of August, the next tranche of more than €3 billion under the Ukraine Facility program and €1 billion from the proceeds of frozen Russian assets under the G7 Extraordinary Revenue Acceleration for Ukraine (ERA) initiative were disbursed. This is an important stabilizing factor for both the budget and the FX market.
The NBU has also taken steps to liberalize the currency by allowing the repatriation of dividends and expanding hedging instruments. This creates a more predictable environment for business without putting any additional pressure on the exchange rate.
In general, the Ukrainian FX market is entering September in a calm mode: reserves are sufficient, inflation has cooled, and external funds are coming in at the right level.
Internal factors are rather short-term spikes, but the exchange rate will be determined by statements, events, and decisions from Washington and Brussels.
US dollar exchange rate: dynamics and analysis
The general characteristic of market behavior is a smooth decline without sharp impulses
August confirmed the trend of gradual depreciation of the dollar against the hryvnia.
Domestic demand remains restrained: importers are working as planned, households are mainly focused on the euro, and the NBU is keeping the exchange rate in balance without any sudden movements.
Key influencing factors:
Forecast:
Euro exchange rate: dynamics and analysis
General characteristics of market behavior
The end of August showed more volatility for the euro than for the dollar. During the week, the exchange rate initially declined (to lows of ~47.80 UAH/€ on the buy side and ~48.40 UAH/€ on the sell side on August 27-28), but recovered to the level of 48.20-48.60 UAH/€ at the end of the period (August 30-31). It was a technical rebound that was synchronized with movements in the EUR/USD pair on the global market after the Fed chairman’s statement.
Prior to the news from the US, the market had recorded a stabilization in the euro after the previous decline, but there were no drivers for a new trend or significantly different levels from the current target levels.
Key influencing factors
Forecast.
Recommendations: act in ranges, keep liquidity, hedge risks
Key universal ideas:
A universal strategy for everyone – flexibility, division of operations into parts, hedging.
For private investors and savers:
For speculative operations on USD/UAH and EUR/UAH:
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 warranties 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 evaluation 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 platform 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 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. KYT Group adheres to EU standards, having a branch in Poland and planning cross-border expansion to European countries.
https://interfax.com.ua/news/projects/1101270.html
Last week, the National Bank of Ukraine (NBU) reduced sales of dollars on the interbank market by $234.8 million, or 27.9%, to $607.8 million, according to statistics on the regulator’s website.
According to the data released by the National Bank, last week the negative balance of buying and selling of foreign currency by banks’ legal entities increased from $43.2 million on Monday to $103.1 million on Thursday, which is almost half as much as last week.
A similar situation was observed in the market of foreign exchange transactions of households: while on Saturday-Monday, sales of foreign currency exceeded purchases by $7.6 million, on Thursday it was $10.5 million, while last Thursday this figure reached $27.5 million.
While a week earlier, for the first time in a long time, a negative balance was recorded in the segment of non-cash transactions of households, last week households again sold more non-cash currency than bought it – by $2-5 million daily.
The official hryvnia exchange rate against the dollar strengthened from 41.3895 UAH/$1 to 41.3401 UAH/$1 last week.
The same dynamics was observed in the cash market, where the hryvnia strengthened by 3-5 kopecks last week: buying to about 41.37 UAH/$1, and selling to about 41.45 UAH/$1.
“The Ukrainian currency market in terms of the dollar is in a calm phase – international factors do not provide drivers for drastic changes, while dosed interventions and liberalization of the NBU maintain low volatility and market controllability,” experts of KYT Group, a major participant in the cash foreign exchange market, said.
According to their estimates, domestic demand is stable without any hype or accumulative drivers, importers act in a planned manner without provoking abnormal outbursts, and there are fewer or no “insurance” margins of market operators in the hryvnia-dollar quotes.
For the next 1-3 weeks, KYT Group expects the exchange rate to remain in the basic range of UAH 41.30-41.85/$1: a break below UAH 41.20/$1 is unlikely without a strong external catalyst, but short impulses are possible based on data from the US or news about external financing for Ukraine.
In the medium term, for 2-3 months, the company expects the exchange rate to be 41.50-42.20 UAH/$1 and adds that the expectation of the September Fed decision with a likely but far from guaranteed rate cut shifts expectations for quotes to the lower end of the corridor. At the same time, autumn budget payments and energy imports may push quotes up, but the start of the export season and its success is a strong stabilizing factor.
“If the scenario of increased uncertainty (security, economic indicators, political shifts) or deterioration of external revenues is realized, short exits to 42.30-42.40/$1 are likely,” KYT Group experts believe.
Issue No. 1 – August 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 on the Ukrainian currency market
The first ten days of August and the beginning of the second were marked by a number of data and decisions that set the tone for the exchange rate in the coming weeks. As before, external factors dominate, while internal factors mostly generate situational impulses and slight volatility without changing the long-term trend.
International context
UNITED STATES. July inflation slowed to within expectations, with prices rising by 2.7% yoy and core inflation (excluding food and fuel) by 3.1%, fueling expectations of a Fed rate cut in September and giving the dollar a brief respite after strong macro statistics in previous periods. The labor market has also cooled: nonfarm payrolls were weaker and unemployment rose, further increasing the likelihood of a dovish scenario for the Fed. Taken together, these factors reduce the so-called USD tightening premium over the next few weeks, at least until the Fed makes clear signals about its future policy.
Eurozone. The flash estimate of the Harmonized Index of Consumer Prices (HICP) published by Eurostat for July was 2.0% y/y (stable), which preserves the ECB’s argument for gradual cautious easing later this year. The final GDP estimates for the two quarters confirmed weak but still positive growth. For the euro’s future trajectory, this is more of a neutral or moderately negative signal in isolation from other drivers, as there was no hawkish surprise.
The UK sent its own signal to the global currency tone – its central bank cut its policy rate by 25 bp to 4.0%, signaling the start of monetary policy rebalancing by other major economies outside the US and the euro area and creating expectations for a broader rate review, provided that other macro indicators confirm this policy. In general, such processes soften the dollar’s advantage in the basket of global currencies over the next 1-2 months, if the Fed moves in the same direction.
The global energy factor has not yet provided any impetus for key economies to revise their policies. Market expectations for oil prices have not changed dramatically, and current quotes fully reflect the news background of recent weeks: the supply/demand balance does not add to inflationary tensions in the EU, so it is not a factor that would force the ECB to tighten its policy. This will also work against further euro appreciation. The expected trajectory is for a neutral or moderately downward impact on the euro, provided there are no other signals or data that could restrain or reverse the current trend.
Thus, given the current international backdrop, the USD has fewer reasons and drivers to strengthen in the short term, while the EUR is more likely to experience a sideways move.
The key factors in the near term will be the September Fed rate decision and further actions by the central banks of the world’s major economies: the expected convergence of rates in the leading economies reduces the US yield advantage, which means that the dollar’s advantage is melting away, but the euro is not getting its new driver either.
Domestic Ukrainian context
Reserves and interventions. The National Bank of Ukraine’s international reserves remain high, despite the NBU’s significant foreign currency sales and debt repayments. Despite the decline, the reserve cushion remains sufficient to smooth out fluctuations and maintain a controlled exchange rate dynamic.
Inflation. In July, inflation slowed to 14.1% year-on-year (yoy), and for the first time in two years, deflation was recorded at -0.2% on a monthly basis. This reduces short-term price risks and inflationary premiums in the pricing of importers/retailers. For the hryvnia exchange rate, these factors are neutral or moderately calming, as they eliminate the arguments for a sharp “insurance” demand for the currency.
External support is coming in as expected, which supports the basic set of factors for a stable hryvnia scenario. The EU Council’s decision to disburse another fourth tranche of more than €3.2 billion under the Ukraine Facility is an important reinforcement of fiscal stability and FX liquidity for the fall months. This indirectly reduces the risks of hryvnia volatility in the foreign exchange market.
A new step in currency liberalization by the NBU is a positive signal of stable expectations of the market and the regulator. In early August, the NBU allowed the repatriation of dividends and expanded hedging instruments, as well as simplified a number of technical FX transactions. Structurally, this reduces market risks and improves predictability for businesses without a sharp additional demand for foreign currency, which also removes pressure on the exchange rate.
The Ukrainian market is entering the second half of August with a preserved exchange rate consensus: reserves are sufficient, external financing is confirmed, inflation has cooled, and liberalization is dosed and managed. Domestic factors will continue to give short bursts, but the overall direction will still be determined outside Ukraine – by international data and decisions, primarily those of the US and the EU.
US dollar exchange rate: dynamics and analysis
General characteristics of market behavior – calm and narrow corridor
In general, the Ukrainian FX market is in a calm phase: international factors do not provide drivers for sharp changes, while the NBU’s measured interventions and liberalization keep market volatility and manageability low. Domestic demand is not driven by hype or accumulative drivers, importers act as planned without provoking abnormal surges, and market operators’ “insurance” margins are smaller or practically absent in the UAH/USD quotes.
Forecast.
Euro exchange rate: dynamics and analysis
General characteristics of market behavior – reflection of the euro to hryvnia exchange rate on external factors
After a long, smooth slide in the buy range of 47.85 to 47.75 and sell range of 48.65 to 48.45, the exchange rate rebounded sharply on 13-14 October: buy range of 47.90 to 48.20 and sell range of 48.50 to 48.85. The official NBU exchange rate rose by a one-day jump from 48.0758 to 48.6472, up UAH 0.58.
A steady downward trend was observed for thirty days, which was interrupted by a corrective recovery on August 13-14.
For most of the period, market rates were equidistant from the official one (the classic corridor), and the bid/ask spread remained at ~0.50-0.70 UAH/€, a sign of stable expectations and lack of nervousness.
The recorded rebound was the result of an external impulse (movement in the EUR/USD pair on the global market after the US statistics) and was quickly reflected in the EUR/UAH market quotes.
Such episodes do not indicate an imbalance, but only the expected technical alignment between the external and internal markets without changing the overall trend – data from the US and eurozone statistics allowed the EUR to make a technical rebound, but the market has already played off this momentum, so without new significant data from the US or the EU, we should not expect further growth in the euro against the hryvnia.
Domestic demand will also not be able to drive the growth of quotations due to the speculative component of setting rates by market participants – after the overheating of June and July and the exhaustion of effective demand, interest in cash euros has cooled. Importers are acting in a planned manner, which smooths out the overall pressure on the market and helps to normalize spreads.
Forecast.
Recommendations: act in ranges, keep liquidity, hedge risks
Key universal ideas:
– On the short term: USD has fewer reasons to strengthen, EUR is more likely to be sideways with technical bounces.
– Liquidity over profitability: keep a stock of free currency for current needs, term instruments only with the option of early access with minimal losses.
– A universal strategy for everyone – flexibility, trenching, hedging.
– Plan in ranges, not points: include exchange rate corridors in your calculations and forecasts, not fixed numbers.
– Keep an eye on spreads: this is now a more important indicator than the exchange rate. Narrowing is the moment to optimize purchases/sales, while widening is a signal to slow down.
– Risk management: Avoid large transactions and fixed commitments, avoid decisions based on emotions after news/social media – in the context of exchange rate calm, the media are trying to “squeeze clickbait out of nothing.”
For private investors and savers:
For speculative operations on USD/UAH & EUR/UAH:
– It’s time for short positions and quick action: record profits regularly in “small portions” and cut losses quickly.
– Watch out for “intersections” between the official and the market: a sudden jump in the official rate and narrowing spreads usually mean a technical lag and a quick “catching up” of the market – an opportunity for short positions / profit taking.
– Take care of liquidity: refrain from transactions or make smaller trades in an illiquid market (narrow choice of profitable offers, wide spreads), do not hold large positions before the release of important news.
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 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.
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KYT Group is an international multi-service product FinTech platform 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 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. KYT Group adheres to the EU standards, having a branch in Poland and planning cross-border expansion to European countries.
