NBU introduces managed exchange rate flexibility from October 3

The National Bank has been implementing managed exchange rate flexibility since October 3.

This is stated in the NBU message, Ukrainian News Agency reports.

Due to steady progress in reducing inflation, accumulation of significant levels of international reserves, increasing attractiveness of hryvnia deposits and government bonds, the National Bank is moving to a regime of managed flexibility of the exchange rate.

The NBU will continue to control the situation in the foreign exchange market and will remain a key player in it, compensating for the structural deficit of foreign currency.

Thanks to this, the course will change in both directions.

At the same time, the NBU will significantly limit these fluctuations, preventing both significant weakening of the hryvnia and significant strengthening.

According to the regulator, the new regime will strengthen the stability of the Ukrainian economy and the foreign exchange market, contribute to their better adaptation to internal and external shocks and reduce the risks of accumulation of currency imbalances, which can generate long-term retention of a fixed rate.

The official rate of managed flexibility will be determined by operations in the interbank foreign exchange market.

At the same time, the exchange rate in the cash foreign exchange market, where citizens can buy and sell currency, will be set according to the same rules as before.

It has been operating in this mode for almost a year and a half, during which the hryvnia both weakened and significantly strengthened.

The monetary policy of the NBU will continue to focus on ensuring the sufficient attractiveness of hryvnia instruments.

This approach will allow citizens to protect their funds from depreciation thanks to hryvnia deposits and government bonds, will help limit demand for currency, maintain exchange rate stability and further reduce inflation.

As Ukrainian News Agency earlier reported, the transition to managed flexibility is one of the steps of the implementation of the Strategy of softening currency restrictions, the transition to a more flexible exchange rate and the return to inflation targeting.

From July 21, 2022, the NBU adjusted the official hryvnia exchange rate by 25% to 36.5686 UAH/USD.

Since August 6, 2022, the National Bank abolished the restriction, according to which banks and non-bank institutions had to buy cash currency from the population at a rate not lower than the official one.

The National Bank allowed banks to sell more currency to the public.

So, from September 6, the volume of cash currency that a bank can offer to the population will include the entire volume of non-cash currency purchased by it from April 13, 2022, and not half of it.

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