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Ukraine's Hryvnia hits new low as central bank eases grip

EditorRachael Rajan
Published 12/07/2023, 02:58 PM
© Reuters.

KYIV - Ukraine's national currency, the hryvnia, has weakened to a new low against the dollar, with the latest figures showing a rate of 36.43 UAH/$ on Thursday. This decline follows a period of managed flexibility initiated by the National Bank of Ukraine (NBU) starting October 3, aimed at allowing greater exchange rate fluctuations.

The NBU's policy shift is part of a strategy to progressively liberalize the currency market. By permitting increased volatility, the central bank intends to enhance the economy's resilience to external and internal shocks while considering overall macroeconomic development and maintaining international reserves.

Deputy Governor Sergei Nikolaichuk of the NBU had outlined in Ekomomicheskaya Pravda that the managed flexibility policy led to limited currency fluctuation levels initially, to help the market adapt. These levels have since been increased, with standard changes rising from 1.3% in October to 3% in November.

On Wednesday, Deputy Chief Serhiy Nikolaychuk acknowledged that an increase in dollar rate fluctuations was inevitable under this policy.

Since the implementation of the new policy, there has been a noticeable rise in interbank market activity without central bank intervention. Transactions surged from $37 million pre-policy to $95 million in November due to managed flexibility policies.

The NBU is preparing for a future transition back to a floating exchange rate once market self-regulation becomes viable without substantial central bank involvement. An upcoming decision by the International Monetary Fund (IMF) regarding a $900 million tranche this December could further impact Ukraine's economic stability and monetary policy direction.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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