In August, the selling rate of the US dollar and the euro in Ukraine will fluctuate between UAH 37–38.

The dynamics will depend primarily on the readiness of our government to let the hryvnia float freely. If the exchange rate is no longer fixed, then we expect it to grow in the range of 37–38 UAH/USD. If the currency market maintains its official stability, then it is more likely that the selling rate of the dollar and the euro will be in the range of UAH 35.10–36.30.

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As you know, in July 2022, the European currency reached parity with the US dollar.. The reason was a strong dollar in the world against the background of the Federal Reserve rate hike. Given the unchanged course of the US monetary authorities to raise rates in the future, we do not expect the euro to rise now, but there is no news yet for its deep fall against the dollar to around 0.96. That is why in August, we assume that the euro and the dollar will be close to parity, and therefore, in Ukraine, the average selling prices of this currency will be similar.

At the same time, we expect that in the Ukrainian currency market the offer to sell the euro and the desire to buy it will be close in volume.. One part of the people will try to get rid of the euro, fearing further sales, and someone will think that now is the time to buy a cheap euro. Such activity will allow the market to independently meet the needs of some and other players without the need for intervention from the regulator..

The Ukrainian hryvnia, despite the interventions of the NBU, is in any case in a weak position due to the destroyed economy, the ongoing conditions of war and the occupied territories. We don’t have to wait for the hryvnia to grow, just as we don’t expect a sharp devaluation.

Firstly, the regulator can restrain devaluation surges with interventions, which it did before.. Fortunately, the existing reserves allow you not to worry about this..

Secondly, the growth in demand for currency after the permission to buy it for almost any import will be smoothed out by a decrease in demand for currency from the population, whose incomes leave much to be desired..

Thirdly, with an increase in the selling rate of the dollar, exporters will gradually sell the currency, thereby increasing the supply on the market.. And the prospect of establishing grain exports not only across the western border, but also by sea can significantly increase foreign exchange earnings.

Assessing the sufficiency of Ukraine's gold and foreign exchange reserves for interventions, we understand that July and August do not portend any surprises for the country's foreign exchange market. But this is not the main thing and, unfortunately, is not an indicator of the stability of the foreign exchange market.. It is much more important that the devaluation sentiment of the population is increasing, despite the seasonal factor.

So, in June, the volume of sales of foreign currency fell to 206.6 million dollars.. from 244.1 million in May and 252.6 million dollars. in April, but the purchase volumes reached $11.9 million. against 10.2 million and 8.6 million dollars. May and April respectively. Despite financial support from countries that sympathize with Ukraine, as well as promises of solidarity in the fight against Russia, we understand that our country is closer than ever to default. This is a pretty powerful trigger for the foreign exchange market as well..

In addition, even without the debt drama, there is an obvious crisis in public finances.. We have already been informed about a decrease in the average temperature in apartments during the heating season. The next step is to cut costs, including pension and social benefits. That is, despite the formal level of sufficiency of gold reserves, for example, which does not allow declaring a default in Ukraine, we actually have lost territories of the country, incomes of the population are falling and the number of jobs is being reduced.. The state budget deficit is chronically growing, while international financial assistance is received rather sluggishly, and worst of all, irregularly, constantly creating “cash gaps” on a national scale. Consequently, the emission of the national currency, even if its volumes decrease, will continue. The hryvnia will not be able to grow in such conditions. And as soon as the war is over, the country will face an economic collapse. Everyone understands this, which also affects long-term exchange rate expectations..

The reason is not only the consequences of the war, but also external factors - all over the world, inflationary pressure beats all records with minimal economic growth. And the world has been deliberately moving towards this in recent years..

Since 2021, all central banks have actively resisted future price increases with monetary policy, but the amount of money they have previously funneled into their economies to escape the effects of the pandemic has been so significant that the current transition to a “dear money” policy will not help immediately.. This means that global economic growth will limp on both legs..

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