16 May 2022 17:14

NBU doesn't rule out return to floating exchange rate of hryvnia

KYIV. May 16 (Interfax-Ukraine) - The National Bank of Ukraine (NBU), seeking to enhance stability on the foreign exchange market, is considering the possibility of returning to the floating exchange rate of the Ukrainian hryvnia, NBU Governor Kyrylo Shevchenko said in an interview with The Asahi Shimbun newspaper.

"I would like to express that now we are considering easing some foreign exchange restrictions. We also are thinking about how to come back with the floating exchange regime. Such a step will bring more stability to the foreign exchange market," Shevchenko said.

The deviation of the market rate from the official rate recorded after February 24 is "tiny", Shevchenko said.

A reported, NBU suspended the operation of Ukraine's foreign exchange market on February 24, except for foreign currency sales, and fixed the hryvnia exchange rate at 29.2549 hryvni/$1, which was then the official exchange rate. These moves led to the emergence of a "black" market for cash foreign currency, where the exchange rate reached 39-40 hryvni/$1 in the first days after February 24. The regulator then permitted foreign currency sales at bank offices, which were in danger of blocking, if their management decided so.

NBU took the next liberalization step on April 15, when it allowed banks and non-bank financial organizations to sell cash foreign currency across Ukraine at an exchange rate no higher than 10% than the official exchange rate and within the amount of foreign currency purchased by them. As a result, a large number of banks declared the possibility of selling foreign currency at the maximum possible exchange rate of 32.17-32.18 hryvni/$1 and simultaneously raised the buying rate, bringing it closer to the selling rate.

However, market actors said that it was extremely difficult to officially buy cash foreign currency in required amounts. The "black" market, in turn, reacted by the slight strengthening of the hryvnia. As a result, the U.S. dollar exchange rate at it was higher by a mere 2% or so. However, as a result of two hikes in late April and last week, this gap increased to approximately 7%, with one U.S. dollar costing 34.3.-34.5 hryvni on the "black" market.