22 November 2021, Monday, 15:43 270

Financiers Forecast Moderate Devaluation Of Hryvnia By Late 2021

Редактор: Daria Zubkova

Financiers forecast a moderate devaluation of the hryvnia at the end of this year and early next.

They announced this to Ukrainian News Agency.

Hanna Voluychak, director of the treasury department of Unex Bank, notes that in November the hryvnia was steadily strengthening, which was caused by several factors at once.

The key factor behind the strengthening was the large quarterly taxes that had to be paid by the business before November 19.

“Considering the fact that the autumn devaluation expected by the market did not happen, and the hryvnia was mainly strengthening, many exporters changed their tactics and were actively selling foreign exchange earnings, fearing an even deeper revaluation. An additional stimulus was the announcement of the successful placement of green bonds. The market understood that the attracted funds will be promptly converted into hryvnia for settlements with green generation. That sharply, 1.5-2 times, increased the volume of foreign currency supply at the interbank foreign currency exchange market," Voluychak noted.

According to her, the physical conversion of the attracted funds into hryvnia did not have any effect on the market - the National Bank bought most of the currency put up for trading in several large transactions.

“This sale became the turning point, after which the quotes began to grow. There was more of a psychological component in this growth. Speculatively inclined participants joined the bullish game, exporters got an incentive not to rush to sell foreign currency earnings, which led to a dynamic exchange rate pullback. At the same time, the demand for currency has increased - mainly due to purchases of foreign companies, including producers of green energy, which need currency to repatriate dividends," the banker added.

However, she noted that the end of November, with a high probability, will be quite turbulent for the hryvnia.

On the last Wednesday of November, the Ministry of Finance will have to pay UAH 4.8 billion as interest payments on previously placed government bonds.

Part of these funds, as noted by Voluychak, will go to the foreign exchange market and create additional pressure on the hryvnia.

"On the other hand, I expect a gradual increase in the supply of foreign exchange from the population, as we enter the peak season of consumer demand. In December, we should also expect an increased demand for foreign exchange for repatriation of dividends. However, it may well be offset by the receipt of foreign exchange earnings from agricultural exports: according to statistics, November and December are peak months. Therefore, in my opinion, a significant devaluation of the hryvnia by the end of the year should not be expected. I believe that quotes will not rise above 26.8 UAH/USD," the banker said.

However, this forecast does not take into account a number of unpredictable factors, for example, the situation with morbidity in Ukraine and quarantine restrictions.

According to her, the mood of foreign buyers of government bonds remains difficult to predict.

In general, their portfolio did not undergo significant changes in autumn - from the beginning of September to mid-November, it decreased by a symbolic UAH 2 billion.

But recently, there has been a decrease in the volume of investments by non-residents in government bonds (-UAH 1.8 billion).

For the most part, this is due to the large redemption of securities last Wednesday.

In turn, Yevheniya Akhtyrko, an analyst at Concorde Capital, noted that increased volatility will be observed in the foreign exchange market by the end of the year.

"There may be more frequent cases in the market when there will be an increased demand for currency or insufficient supply. These fluctuations are associated with the traditional phenomena of the end of the year: an increase in budget payments, completion of contracts and transactions. The current rise in the exchange rate is most likely associated with an increase in the influence of psychological factors associated with an increase in the flow of negative political news (intensification of military aggression, the scandal with Wagnergate, the cancellation of the privatization of Bolshevik, the fall in government ratings)," Akhtyrko said.

According to the forecast of quotations in the foreign exchange market, the analyst noted that in November-December they are forecasted at the level of 26.4-26.5 UAH/USD, and at the beginning of next year - 26.7-26.8 UAH/USD.

“Most likely, in the first quarter of 2022, the trade deficit will begin to grow, as a result of which fundamental devaluation pressure will increase. We expect that the revaluation trend, which has continued since the end of 2020, will end somewhere in this period, and the trend will change to a moderate devaluation," Akhtyrko summed up.

As Ukrainian News Agency earlier reported, the hryvnia exchange rate in the interbank foreign exchange market after a 10 kopecks drop on Thursday, decreased by 6 kopecks to 26.56 UAH/USD on Friday.

Since the beginning of this year, the hryvnia exchange rate on the interbank market has strengthened by 6.18%, from 28.31 UAH/USD to 26.56 UAH/USD.