The effect of temporary factors that led to the weakening of the hryvnia early this year can be whittled down during the rest of the year thanks to favorable prices of export-oriented products, according to Deputy Governor of the National Bank of Ukraine (NBU) Oleh Churii.
"The effect of temporary factors seen at the beginning of the year can be neutralized by a favorable impact of fundamental factors during the rest of the year; this includes prices on foreign markets for export-oriented products, as it was in 2017," Churii said.
He recalled that after Ukraine introduced the floating forex rate of the hryvnia in 2015, there is a certain seasonality in the forex market: for a third consecutive year, demand for foreign currency from importers that form stocks of goods for the new year grows during the first months of the year amid a decrease in farmers' earnings in foreign currency.
Read alsoHryvnia keeps weakening on interbank market"These seasonal factors are the key reason for growing fluctuations of the hryvnia forex rate on the interbank market since the beginning of January this year. Seasonal decline in business activity, mainly in the agrarian sector, leads to a reduction in foreign currency earnings from farm produce exports, while the market sees an increased demand for currency from importers," Churii added.
He also stressed that the hryvnia forex rate weakened by a mere 3% last year, despite some periods of increased fluctuations.
To mitigate the impact of the factors, the National Bank continues to maintain its presence in the interbank forex market, he said. Since the beginning of this year it has sold $53.5 million to back up the hryvnia.
"The National Bank has enough resources to further smooth out excessive fluctuations in the forex market in case of necessity: its international reserves amounted to $18.8 billion at the beginning of January," he said.
Since December 18, 2017, the Ukrainian hryvnia has almost daily updated the minimum annual level, approaching its historical minimum of UAH 30 per U.S. dollar.
In 2017, the hryvnia weakened against the dollar by 88 kopecks, or 3.2%.
From January 1 to January 12, 2018, the hryvnia lost another 38 kopecks, or 1.3%, in value, to UAH 28.45 per U.S. dollar.
The forex rate at Kyiv foreign exchange booths on January 12 was set at UAH 28.70-28.75 per U.S. dollar, while it was UAH 28.65 the day before.