32 C
New York
Saturday, June 25, 2022
More

    Latest Posts

    Will the course calm down now? What will happen to the dollar after the decision of the NBU

    - Advertisement -

    We tell you what will change after the decision of the NBU to lift restrictions on the cash rate of purchase and sale of foreign currencies

    Ads

    The NBU explained the decision at the cash rate / Photo: Getty Images, Collage: Today

    - Advertisement -

    On Friday, May 20, the NBU released the dollar and banks were allowed to sell the currency at any rate. At the same time, the official hryvnia exchange rate against the dollar remains fixed at UAH 29.25/USD.

    The National Bank explained what this decision will lead to

    Some restrictions remain the same

    - Advertisement -

    As the NBU explains, the frozen official exchange rate makes it possible to curb inflation due to the reduction in the cost of critical imports and to keep inflationary expectations under control.

    Also National Bank did not cancel restrictions for banks on setting the exchange rate in the non-cash segment of the foreign exchange market. Banks must conduct transactions for the purchase and sale of non-cash currency with customers at a rate that is in the following range: the lower limit is the official rate, and the upper limit is the official rate +1%.

    At the same time, the bank notes that most transactions in the foreign exchange market are carried out in the non-cash segment. There, in particular, exporters and importers sell and buy non-cash currency.

    “Thus, importers can buy foreign currency at a rate that is close to the rate of selling foreign currency by exporters. In the event of a shortage of foreign currency on the market, the NBU closes it by selling foreign currency from international reserves,” – the message says.

    The cash market operates with restrictions

    Before martial law, there was almost free flow of cash between the cash and non-cash segments of the market. In addition, the population could freely buy foreign currency from banks. Since the beginning of martial law, the NBU has introduced such prohibitions that the flow of currency is now impossible, and the volume that banks can sell to the population is limited.

    Now banks can sell foreign currency through cash desks only to the extent that they previously bought it from the population.

    However, during martial law, there is such a tendency that in the cash market mainly buy foreign currency for speculative earnings, financing “gray” imports, which does not belong to the critical, and also transfer of savings into foreign currency. Since these areas are not a priority during the war, the NBU does not spend international reserves on them in order to smooth out fluctuations.

    The efficiency of the cash market will increase

    “From May 21, 2022, the NBU allowed banks not to limit their rates for the sale of cash currency. This equalizes the conditions for banks compared to exchangers, which will contribute to increase the efficiency of the cash market and reduce exchange rate fluctuations on itthe message says.

    Another important change is now banks can set the rate at which they deduct hryvnia funds from clients’ accounts, if customers pay with hryvnia cards abroad or withdraw cash from cards.

    As explained in the NBU, such changes will bring currency conversion rate for Ukrainians who are now abroad, and currency purchase rate for those who remain in the country.

    Also, these decisions will reduce “card tourism”. There is data that shows that abroad, most transactions with hryvnia cards are cash withdrawals. And then this cash returns to Ukraine and ends up on the illegal cash market.

    “That is, de facto scarce foreign exchange resources can be spent on non-priority needs for wartime, which is now extremely important to minimize. Therefore, equalizing the conditions for direct (through cash transactions) and indirect (through card transactions) purchases of currency by the population in Ukraine and abroad is a measure which will prevent the unproductive withdrawal of capital and protect Ukraine’s international reserves”, – explained in the NBU.

    What will happen to the course in the summer?

    According to Deputy Head of the NBU Yuriy Gelety, the removal of restrictions will improve the working conditions of legal market entities.

    “This will help strengthen competition, increase the liquidity of the legal segment and reduce the volume of illegal transactions. All this will make the foreign exchange market more stable and will help reduce the amplitude of exchange rate fluctuations in the cash segment,” he explained.

    And as Oleg Pendzin, executive director of the Economic Discussion Club, said in a comment to Segodnya, there will be no changes for the financial market itself:

    “The NBU has not abolished anything fundamental. And then the bank will not be able to back up the exchanger from the correspondent account. And the interbank market will only work to support critical imports and only at the rate of 29 hryvnia 25 kopecks,” the expert noted.

    At the same time, the Center for Economic Strategy predicts that in the coming weeks it can be expected that the rate will roll back, and speculation will stop.

    Previously, we talked about whether Ukraine has a chance to hold the dollar, and also wrote that the dollar, in spite of everything, set its sights on a new record.

    Ads

    Source: Segodnya

    - Advertisement -
    spot_img

    Latest Posts

    spot_img

    Don't Miss