Analysts project hryvnia rate in April

Analysts say the forex rate of the hryvnia, Ukraine's national currency, in April will depend on non-residents' demand for Ukrainian government bonds, foreign trade conditions, and dynamics of the U.S. dollar versus a basket of the world's major currencies.

"Over the next month, the exchange rate [of the hryvnia] will be within a range of UAH 27.5-28.5 per U.S. dollar, RBC Ukraine wrote on March 31, referring to financial analysts with investment companies.

Causes behind hryvnia's fall

The forex rate of the national currency was below UAH 28.00 per dollar in late March. On Tuesday, the hryvnia strengthened on the interbank market against the previous trading day to UAH 27.86 when selling and UAH 27.84 when buying the U.S. dollar, whereas last week, the hryvnia depreciated, breaking the mark at UAH 28 per dollar at the auction by the end of the week. This despite the fact that many experts expected the seasonal strengthening of the Ukrainian currency.

Read alsoS&P releases outlook for hryvnia forex rate by late 2021Several factors have contributed to the weakening of the hryvnia. Senior financial analyst with ICU Group Taras Kotovych says investors are currently not very optimistic about emerging markets. Other factors are the repayment of government bonds and concerns about the deteriorating situation with the coronavirus in Ukraine. "In this combination, the forex market shifted the balance in favor of demand, which led to new fluctuations in the exchange rate," he said.

Head of the analytical department at Eavex Capital Dmytro Churyn believes that the main factor behind the hryvnia weakening is the general strengthening of the U.S. dollar against other global currencies.

"As a confirmation of such trends we can take the dynamics of the so-called dollar index (USDX), which is calculated on the basis of the dollar exchange rate to six currencies, namely the euro (EUR), yen (JPY), pound sterling (GBP), Canadian dollar (CAD), Swedish krona (SEK), and Swiss franc (CHF). Over the past week, the dollar index rose by 1.3%. Over the same period, the dollar against the hryvnia climbed by 1.0%, to UAH 28 per dollar," he said.

Forecast for April

Kotovych says the hryvnia rate may strengthen to UAH 27.5 per dollar in April. This will be facilitated by the expected recovery of non-residents' inflows into government domestic loan bonds in hryvnias, the effect of seasonal factors, and favorable trade conditions.

In turn, Churyn believes that there are prerequisites for further weakening of the hryvnia in April. "Accordingly, the hryvnia nearest rate is expected to reach UAH 28.5 per dollar," he summed up.

Background

Earlier, Chairman of the of the National Bank Council Bohdan Danylyshyn said a reduction in foreign exchange earnings from non-residents had led to an increase in the lack of foreign currency on the interbank market, which weakened the hryvnia.