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Ukraine's central bank moves to managed flexibility of exchange rate

The NBU has enough reserves and international support.

Ukraine's central bank moves to managed flexibility of exchange rate
Photo: NBU

In view of the steady progress in reducing inflation, the accumulation of a significant level of international reserves, the increase in the attractiveness of hryvnia deposits and domestic government debt securities, the NBU is moving to a regime of managed flexibility of the exchange rate.

The NBU will continue to monitor the situation on the FX market and will remain a key player in it, compensating for the structural deficit of foreign currency. Thanks to this, the exchange rate will change in both directions. However, the NBU will significantly limit these fluctuations, preventing both a significant weakening and a significant strengthening of the hryvnia.

The new regime will strengthen the resilience of the Ukrainian economy and FX market, promote their better adaptation to domestic and external shocks, and reduce the risks of accumulating FX imbalances that can be generated by a long-term maintenance of the exchange rate peg.

The official exchange rate under the regime of managed flexibility will be determined by transactions in the interbank FX market.

At the same time, the exchange rate in the cash FX market, where individuals can buy and sell foreign currency, will be set according to the same rules as before. This market has been operating in such a mode for nearly a year and a half now, during which the cash exchange rate has gone both up and down significantly. The NBU will continue to make efforts to promote the proper operation of the cash FX market, in particular by minimizing the difference between the cash and official exchange rates.

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