Exporters who work with euro-currency proceeds made very good money if they managed to sell it in the morning of February 6 or in the evening of February 9, when the rate of its sale on the interbank market reached 39.80 hryvnias and even slightly higher.
And they obviously missed their chances for additional earnings if they sold the currency on Tuesday, February 7, Wednesday – February 8, and this Friday – February 10, when the euro selling rate periodically sank to 39.60 and below.
The reason for such a spread in quotes of recent days was the echoes of currency rallies in the euro / dollar pair after the recent meetings of the US Federal Reserve and the ECB on interest rates, as well as the publication of data on the labor market in the United States.
It was these statistics and subsequent statements by the Fed leadership that quite unexpectedly again gave speculators hope for a new aggressive increase in the interest rate by the Fed already at its next meeting, which will be held on March 22 this year.
In general, volatility continued for the euro/dollar pair during the week, which was immediately reflected in the euro exchange rate against the hryvnia. The issue price is about 37 kopecks per euro if the trend in the euro/dollar pair changes by 1 US cent. And there were many such jumps during this period.
Chart for the euro/dollar pair as of 15:00 Kyiv time:
As a result, over the week, the euro on the interbank market fell by almost 36 kopecks – from 39.4209/39.8151 on Monday morning February 6 to 39.0662/39.4569 at the close of real trading in the euro currency at 15:00 Kyiv time on Friday February 10th.
Of the Ukrainian factors, the behavior of the interbank market and the cash market was already influenced by the standard positions for wartime:
1. Sale by the National Bank of the dollar at auction to cover the currency deficit
The NBU without any tension kept the corridor in the range of 36.5686-36.9343 hryvnia and sold the dollar almost daily. The increase in Ukraine’s gold reserves to $29.9 billion as of February 1, 2023, due to the receipt of Western financial assistance, leaves no chance for all skeptics in terms of assessing whether the regulator has the ability to keep this corridor without any particular difficulties on the interbank market;
2. A sharp increase in the reserve ratio on the correspondent account with the NBU and benchmark-OVGZ, which is coming for banks since February 11
To fulfill the increasingly stringent requirements of the National Bank, all days of this week, bankers were already forced to keep amounts from 121.4 billion to 146.4 billion hryvnias in the correspondent account with the National Bank, although it seems to be not so long ago – in November-December 2022 – they were limited to UAH 70-80 billion, placing the entire hryvnia surplus in certificates of deposit.
From February 11, the reserve amount will become even larger, and only two things “save” financiers: the gradual curtailment of hryvnia investments in NBU depsertificates and the purchase of benchmark government bonds, which are included in the coverage of the reserve requirement for up to 50% of the regulator’s requirement. At the primary auctions of the Ministry of Finance banks line up behind these securities, and demand at the auction on February 7 exceeded supply by almost 6 times.
It is not surprising that officials of the Ministry of Finance are trying not only to bring down the weighted average yield for buyers in this situation (this time it was 19.59% per annum), but also deliberately limit the volume of securities offered for this. This time it was limited to the total volume of bonds for UAH 5.5 billion at face value.
Taking into account the receipts of Western financial assistance, the Ministry of Finance can now afford such a format of work with banks, and together with the National Bank, in an almost emission-free way, for the time being, patch up “holes” in the budget.
This also contributes to the relative and conditional, but still at least some stability of the Ukrainian currency market. Even despite the aggravation of the military situation at the front and the numerous jumps in the euro exchange rate on international platforms against the dollar.
There is no panic and the population is steadfastly enduring all the hardships of war. This leads to the fact that the dollar exchange rate at the cash desks of banks has been within the corridor of purchases and sales of 39.50 – 40.75 hryvnia for quite a long time, and in the exchange offices of financial companies – from 39.70 to 40.50 hryvnia. And sometimes exchangers of financial companies even sell dollars for 40.10-40.20 hryvnias, and even lower.
And the absence of fever in the cash market is always a very important indicator for the entire foreign exchange market, both in peacetime and, moreover, in wartime.
Cash exchange rates for February 11-12
This weekend, the financial companies’ exchangers will mainly work in the “with turnover” format, without any special attempts to “warm up” the dollar rate, and with a fairly average spread even for such a traditionally speculative currency as the euro. Ukrainians should not expect surprises at the exchange rate these days, which is always positive in our difficult wartime.
For the dollar, the spread in most exchange offices of financial companies will range from 20-25 kopecks to 55 kopecks, and for the euro – from 25-30 kopecks to 70 kopecks.
Dollar quotes in the main part of the exchangers this Saturday and Sunday will be within the corridor: reception 39.70 – 39.90 hryvnia and sale from 39.95 to 40.25 hryvnia.
And for the euro currency these days, most exchange offices of financial companies will set the following price tags for buying / selling euros: acceptance within 42.30 – 42.55 hryvnia and sale – from 42.60 to 43.00 hryvnia.
Some exchangers of financial companies, in the absence of sufficient competition in their region or as they approach the war zone, as an additional risk premium, can adjust the quotes calculated by me by plus or minus 5–10 kopecks per dollar and up to 15–20 kopecks per euro .
