By KYIV. Sept 15 (Interfax-Ukraine) – The National Bank of Ukraine (NBU), after making a decision to return to a policy of flexible exchange rate formation, will compensate for the structural shortage of currency in the market with its foreign exchange interventions, creating a situation where the exchange rate can fluctuate in one direction or the other, Deputy Governor of the National Bank of Ukraine Serhiy Nikolaychuk said.
“At the same time, especially in the first stages of exchange rate flexibility, we will quite significantly limit these exchange rate fluctuations,” he said at a briefing in Kyiv on Thursday.
Nikolaychuk emphasized that the design of the NBU’s future exchange rate policy should ensure exchange rate stability.
In turn, Governor of the National Bank Andriy Pyshnyy noted that the functioning of the foreign exchange market under conditions of fairly strict administrative restrictions and a fixed exchange rate creates additional risks and undermines export potential.
“Taking into account the fact that Ukraine is finding it increasingly difficult to cope with external and internal challenges, which could be absorbed much more efficiently in conditions where market elements of the foreign exchange market function,” explained the head of the NBU.
He recalled the prerequisites for making a decision to abandon the fixed exchange rate: inflation expectations, the real market rate, the state and volume of gold and foreign exchange reserves, the situation on the foreign exchange market, financial stability.
“Now the National Bank, our team, to a certain extent reminds me of a sniper who is trying to hit the target exactly. But at the same time, the target, accordingly, is constantly moving, is in a state of displacement, and we must hit it exactly in such a way that, God forbid, not to damage all the achievements that we have today by effectively ensuring the mandate of exchange rate and price stability,” Pyshnyy emphasized.
As reported, the National Bank of Ukraine, after the start of the full-scale war in February last year, fixed the official hryvnia exchange rate at the level of UAH 29.2549/$1, after which it once devalued it to the level of UAH 36.5686/$1 on July 21 of the same year and since then maintains this level, making efforts to ensure that the spread with other rates (cash, card, interbank) is minimal.
