The national currency in the ending 2021 pleased Ukrainians with relative stability with periodic fluctuations under the influence of objective factors.
The Ukrainian economy was gradually recovering from the devastating blow of the 2020 coronavirus crisis, adjusting to the new reality and new types of quarantine restrictions. And the rate of the national currency did not show a rapid depreciation during the year.
The exchange rate of the national currency did not show a rapid depreciation during the year
Even in the previous year, at the peak of nervousness and uncertainty, the hryvnia held out, weakening slightly – to UAH 28 / USD. And in 2021 there were no such acute force majeures, only situational fluctuations in the exchange rate, and the hryvnia was able to enter the top 10 currencies of developing countries in terms of strengthening against the dollar.
The Ukrainian currency started this year at around UAH 28.4 / USD. at the official exchange rate, and ends at about UAH 27.3 / USD, having strengthened by almost 4 percent over 12 months. At the same time, the government put into the budget for the current year a rather pessimistic rate of UAH 29.1 / USD, and the real situation turned out to be far from predicted.
The National Bank always repeats that there is a floating rate in Ukraine, which depends on market conditions, so the regulator has no intention of keeping the exchange rate at one or another level.
The NBU only conducts foreign exchange interventions in order to smooth out excessive fluctuations – replenishing reserves in the event of a rapid strengthening of the hryvnia or selling the currency when it is strongly weakened.
The strong position of the hryvnia in 2021 was evidenced by the significant predominance of foreign currency purchases in the interbank foreign exchange market in reserves: the regulator bought almost $ 3.7 billion, selling only $ 1.3 billion.
At the same time, the bulk of the sale of foreign currency fell on the last months, when the position of the hryvnia weakened due to alarming news about a possible military invasion of the Russian Federation, as well as because of the difficult situation in the energy sector. The global horror story also added fuel to the fire – the risks from the emergence of a new strain of the Omicron coronavirus.
The national currency returned to the usual corridor of 27-27.5 UAH / USD. and, it seems, is in no hurry to depreciate further
These factors became the main factors in provoking the weakening of the hryvnia towards the end of the year, which managed to strengthen in November to a maximum of 26.06 UAH / USD. As a result, the national currency returned to the usual corridor of 27-27.5 UAH / USD. and, it seems, is in no hurry to depreciate further.
The position of the hryvnia was also favorably influenced by the receipt at the end of November of the long-awaited tranche from the International Monetary Fund in the amount of almost $ 700 million. The readiness of the IMF to continue cooperation increases the reliability of Ukraine in the eyes of the world community, in particular, investors who are ready to invest in our country.
Traditionally, on New Year’s Eve, the hryvnia is weakened. Most organizations settle accounts with their employees, pay bonuses and “thirteenth salaries”, which leads to an increase in the money supply among Ukrainians, who actively spend it on food for the New Year’s table, gifts and vacations. In addition, some people convert premiums into savings by buying currency.
At the same time, the supply of foreign currency on the market also slightly increases, as exporters increase the sale of foreign currency earnings in order to pay quarterly taxes.
Now there is no noticeable drop in the exchange rate, although experts predict a temporary weakening of the national currency
Now there is no noticeable drop in the exchange rate, although experts predict a temporary weakening of the national currency in the first weeks of 2022 due to a decrease in business activity during the holidays. However, this phenomenon is temporary and soon the exchange rate will stabilize again.
Ukrainians have always been worried about the question: what to expect from the exchange rate, because many of our compatriots are accustomed to trusting foreign currency more and just running to exchange offices.
The situation at the beginning of the coming year does not yet bode well for serious hesitation. When calculating the state budget for 2022, the government set an average annual rate of UAH 28.6 per dollar, and many economists and bankers agree with this forecast.
The hryvnia survived the crisis of 2020 and the outgoing 2021 without any collapse. And in the absence of global force majeure, there should be no unpleasant currency surprises.
The situation at the beginning of the coming year does not yet portend serious fluctuations in the hryvnia exchange rate
Of course, there remains the possibility of the influence of already existing negative factors. The risk of a military escalation on the part of Putin’s aggressive Russia should never be discounted: if hostilities intensify, investors will begin to withdraw capital from Ukraine, which will certainly affect the exchange rate.
The situation in the energy sector also remains tense: world prices for coal and gas are close to record levels, and Ukraine is forced to import energy resources at inflated prices, which consumes foreign currency.
And, of course, nobody canceled the influence of new strains of coronavirus on the global economy. Now the conditions are dictated by “Omicron”, forcing many countries to impose severe quarantine restrictions, this, in turn, affects the global economy, of which Ukraine is a part.
However, none of the experts gives and, by and large, cannot give clear forecasts on the exchange rate for the coming months, realizing the instability of the situation in the country and in the world.
Perhaps you should not scrupulously study the numbers in exchange offices: exchange rate fluctuations are already a familiar thing and do not radically affect the well-being of ordinary Ukrainians. Store prices and utility rates go up regardless of the daily changing exchange rate, and it’s better to spare yourself the unnecessary worry. After all, we are on the verge of a holiday.