NBU explains hryvnia's July slide

Hryvnia depreciation against the U.S. dollar by almost 50 kopiykas at the official rate in July is due to the growth of demand for foreign currency in the non-cash market under the influence of short-term factors, including the purchase of foreign currency by importers, VAT refunds, and payments to non-residents on domestic bonds in UAH, according to head of the Board of the National Bank of Ukraine, Bohdan Danylyshyn.

"On the one hand, demand was conditioned by importers buying foreign currency, and on the other hand, additional demand was stimulated by the hryvnia, which entered the market as a result of VAT refunds and payments to non-residents on UAH," the official wrote on Facebook.

At the same time, Danylyshyn notes that the VAT refund has a double impact on the foreign exchange market, as these funds are partially used by exporters to buy foreign currency, and as exporters' working capital, reducing the need to "bring" foreign exchange earnings into Ukraine.

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He also recalled that a certain depreciation of the hryvnia in the run-up to the fall was also observed in past years, although it happened somewhat later than it did this year.

"In order to prevent sharp hryvnia fluctuations, the National Bank is ready to enter and it enters the foreign exchange market of Ukraine with interventions to sell foreign currency, and it did so last week," added Danylyshyn.

UNIAN memo. On Monday, July 30, the UAH quotes against the U.S. dollar in the interbank currency market of Ukraine at the close of trading were set at UAH 26.83/26.87. Since the close of trading, the hryvnia fell in price against the dollar by 11 kopiykas.