National Bank updates strategy of forex interventions.

Photo from UNIAN

Photo from UNIAN

The National Bank of Ukraine has updated the Foreign Exchange Intervention Strategy as the previous Strategy, designed for 2016-2020, is expiring.

The updated Strategy will preserve the key three objectives of the NBU’s interventions:

  • Smooth the functioning of the foreign exchange market to avoid the negative impact of excessive exchange rate volatility and extraordinary events in the foreign exchange market on price and financial stability, as well as economic growth;
  • Accumulate international reserves and maintain them at the level generally perceived as sufficient; and
  • Support the transmission of the key policy rate as the main monetary policy instrument, when it is not efficient enough.

The four key forms of interventions also remain the same, i.e. FX Auction, Single Rate Intervention, Request for Quotations and Targeted Intervention.

Read also International reserves grow to almost US$29 bln as of Dec 28 – NBU Council chief It is noted that four key forms of implementation of foreign exchange interventions have remained unchanged, in particular a foreign currency auction, intervention at a single rate, intervention at the best rate, and targeted intervention.

The corresponding document also defines five principles for the implementation of forex interventions on the interbank foreign exchange market:

  • Compliance with the inflation targeting regime and conformity with the floating exchange rate regime;
  • Minimum adequacy of foreign exchange interventions;
  • Constructive uncertainty of the parameters and tactics of forex interventions for foreign exchange market players; and
  • Equal conditions for market participants.

Background

In October 2016, the Board of the National Bank of Ukraine approved the Strategy of Forex Interventions of the National Bank of Ukraine for 2016-2020.

Author: UNIAN

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