A dollar at 30 is not the limit? How Russia’s invasion of Ukraine will hit the exchange rate

The recent rise in the dollar exchange rate showed its maximum value since the end of May 2021. Due to the tense geopolitical situation, investors prefer to sell the Ukrainian hryvnia, which is the reason for some devaluation.

“Today” learned from experts how relations between Ukraine and Russia will affect the exchange rate, and what to expect from the dollar in the future.

The Ukrainian hryvnia continues to feel pressure due to a sharp increase in geopolitical risks, including the negotiations between Russia and NATO did not bring the expected easing of pressure, and the situation became even a little more tense than a couple of days before. So says the head of “EXANTE Ukraine” Vladimir Pozny.

The expert says that this is why investors massively sold the Ukrainian hryvnia, and this, in turn, caused the dollar to rise to 27.7 – maximum since May last year.

“It often happens that the hryvnia grows heavily against the dollar due to high interest rates and improved macroeconomic conditions, and then comes under sharp pressure, canceling out the growth of entire months in a matter of days,” says Volodymyr Pozniy.

The expert is also sure: the chances, when a stable demand is formed in the region 27.60-28 UAH per dollar, is high. So far these levels are holding pressure but have become less firm over the last couple of days.

How a Russian invasion could affect the dollar in Ukraine

Now the world lives in conditions of hybrid wars, so the risk of the conflict turning into an economic plane, blackmail and threat should still be considered more relevant.

“The risks of a direct armed invasion in the coming weeks are still seen as low. An armed invasion for Russia would entail too great economic consequences, bleeding the economy. There is simply no economic sense in this,” says Pozniy.

In the comment “Today” Roboforex analyst Andrey Goylov said that in the domestic debt market, non-residents reduced their investments in government bonds by UAH 4.30 billion. – before UAH 88.35 billion The proceeds from the sale of government bonds are withdrawn to parent jurisdictions. In the event of the start of a military invasion of the Russian Federation into Ukraine, this trend will only speed up the pace.

The NBU has sufficient reserves to deal with short-term market panic. However, in the event of a real military conflict, the regulator will have to introduce strict currency restrictions of the 2015 model:

• stop trading;
• mandatory sale of foreign exchange earnings by exporters;
• restriction of foreign exchange transactions for individuals, etc.

“As a result, we will see an acceleration in price growth and devaluation of the hryvnia. I assume that the anti-record of 2015 will be broken,” — the expert expressed his opinion.

What should Ukrainians do in such a situation?

Andrey Goylov is convinced that in such a situation it is recommended keep savings in foreign currency in case of significant fluctuations in the quotations of the euro or US dollar.

“At the same time, it’s not worth rushing to get rid of government bonds or withdraw funds from deposits, since such crises have occurred repeatedly and were resolved through diplomacy. Impulsive investment decisions, as a rule, bring only losses,” the expert says.

What happens on the interbank market

In the comment “Today” Roboforex analyst Andrey Goylov also said that the new statements of the Russian Federation brought down quotes Eurobonds of Ukraine and led to the depreciation of the Ukrainian national currency by interbank.

The rates to maturity of securities of almost all issues exceeded 10% per annum. The price of the most bonds with the shortest maturity – this year, lost 2.00%, as a result of which the yield on them “jumped” from 10.60% to 14.25%. Investors seek a risk premium.

Putin thwarted the invasion of Ukraine

Events in Kazakhstan have distracted Russian President Vladimir Putin from plans for an immediate invasion of Ukraine. This opinion was expressed by Member of the European Parliament Viola von Cramon-Taubadel during an online discussion of the Kiev Security Forum, established by the Arseniy Yatsenyuk Open Ukraine Foundation.

“These events in a certain way distracted Putin from plans for an immediate invasion of Ukraine. One can say that their military capacities are somewhat overstretched today, of course, he will not act on both fronts”, she said.

Cramont-Taubadel noted that Putin wants to restore the Soviet Union and the Russian Empire.

According to her, Russia considers everything that is near its borders to be its sphere of influence, and the European Union has not yet made any diplomatic, military or economic efforts to refute such an attitude towards the neighboring countries of the Russian Federation.

Why talk about a real invasion?

On the night of January 13-14, hackers launched a massive cyberattack on government websites. Many sites have temporarily stopped their work.

By the way, even the State Inspectorate for Nuclear Regulation of Ukraine made an alarming statement that its website was also subjected to a large-scale hacker attack.

On the morning of January 14, the following sites did not work:

• Cabinet;
• Ministry of Foreign Affairs of Ukraine;
• State Emergency Service of Ukraine,
• Ministry of Education of Ukraine;
• Ministry of Sports;
• Ministry of Energy;
• Ministry of Agrarian Policy;
• Actions.

The Ministry of Culture stated that Russia was involved in hacker attacks – in this way, the aggressor country wants to sow chaos among Ukrainians and destabilize the situation.

If hackers had stolen the data of Ukrainians from the Diya program this night, it would have been a powerful attack in the history of Ukraine. Using this information, attackers could blackmail people and even transfer property to other people.

As Alexander Boltyan, an analyst at Esperio, said earlier, the first two months in 2022 will be volatile. The rate can be kept at the level of 28-28.5 UAH per dollar.