In the first days of November, demand for foreign currency rose due to a significant increase in budget spending, in particular on defence and security.
As the National Bank noted, Ukrainians traditionally bought more foreign currency at the start of the month after monthly limits were reset.
At the same time, the supply of foreign currency was constrained by large VAT refunds at the end of October. In addition, because of Russian shelling, the agricultural and metals sectors increased exports less than expected and, accordingly, sold less foreign currency. One-off sales by individual companies only partially supported supply. During periods when these sales declined, the hryvnia weakened against the US dollar.
The National Bank said the market situation remains under control. The official hryvnia rate changes depending on the balance of supply and demand for foreign currency, as provided for under the managed flexibility regime.
The regulator has already responded to the widening gap between the official hryvnia rate and the cash selling rate at exchange bureaux, which helped to narrow it. First, the NBU held consultations with market participants, and on 3 November it pre-emptively exchanged non-cash foreign currency for cash with banks to replenish tills.
These operations showed that the financial system has no problems with cash foreign currency. The NBU offered banks US$100 million, but they purchased only US$14 million. There was no demand at all for an offer of €100 million. The National Bank satisfied all banks’ requests, so there are no economic reasons for the gap between the rates to widen.
To continue supporting banks’ foreign-currency liquidity for citizens’ needs, the regulator plans to conduct repeat operations on 4 November.
Ukraine’s international reserves remain sufficient to ensure market stability. As of 1 October this year, they stood at US$47.1 billion and increased further by the end of October. By comparison, at the start of the full-scale invasion this figure was less than US$30 billion.