The dollar rises in price before our eyes, in the market – “inflationary panic”

Those who managed to stock up on cheap dollars are rubbing their hands happily: the rate has gone up sharply. On the Old New Year, the cash dollar crossed the mark of 28 hryvnia and it seems that it is not going to stop. What is the reason for the rise in price what to expect from the dollar in January 2022, said the experts “Today”.

They are Oleg Pendzin, a member of the Economic Discussion Club, Oleksandr Okhrimenko, President of the Ukrainian Analytical Center, Andriy Shevchishin, Head of the Forex Club Analytics Department, and Maxim Oryshchak, an analyst at the Center for Exchange Technologies.

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What happened to the course in a week

The dollar, which stabilized for three days off, started to go up in price last Tuesday, January 11th. There has not been such a rapid growth in the exchange rate since November last year, when the dollar grew by the hryvnia in two weeks, to UAH 27.40. This year, it has already risen in price by 73 kopecks, to UAH 28.13, but the growth continues. The last time the dollar was worth this much was 13 months ago, in December 2020.

The spread (the difference between the buy and sell rates) also expanded noticeably, reaching an average of 26 kopecks (+6 kopecks). This indicated that the bankers believe that the dollar will continue to rise in price and are trying to buy it cheaper and sell it more expensive.

The maximum rate at which one could turn in a cash dollar was UAH 27.95 (41 kopecks more than a week ago), the minimum rate at which one could buy a cash dollar was UAH 28 (42 kopecks more than a week ago) . Note that such a high purchase rate is observed in exchange offices and banks working to purchase currency. The declared low selling rate there, as a rule, is virtual, there are no dollars available at such a price.

But this time it was different – dollars at UAH 28 were actually sold by Privatbank, a queue lined up behind them. In other banks, the real selling rate starts from UAH 28.15/USD, while the buying rate does not exceed 27.90.

The National Bank weakened the hryvnia from UAH 27.50 to UAH 27.74 over the week, with the main “blow” coming on Thursday, January 13 – devaluation by 20 kopecks at once. On Monday, January 17, the regulator set an even lower rate of UAH 27.95/USD (+20 kopecks). In total, for 17 days of January, the hryvnia depreciated by 2%.

Analysis of the market situation

Experts say that the main reason for such a rapid growth in the rate is the revival of business activity after the New Year holidays.

As Alexander Okhrimenko said, the supply of foreign currency on the non-cash market lagged behind demand: sellers held on to dollars, expecting even greater growth in the exchange rate, currency speculators actively and successfully pumped it up, and the National Bank reacted insufficiently, selling currencies a little.

“Estimates are negative, as there has been an inflationary panic in the world,” says Maksim Oryshchak. “In the United States, a record growth over the past 40 years (7%) in consumer inflation in December 2021. Against the backdrop of this information, the price of gold and cryptocurrency rose sharply And if there is a global increase in demand for protective instruments, then in our country we can also expect the dollar to grow.”

Oleg Pendzin noted that the situation was aggravated by the ineffective auction of the Ministry of Finance for the sale of securities: they were sold for only UAH 3.9 billion. At the last two auctions at the end of December, government bonds were sold for UAH 35.5 billion.

Andriy Shevchyshyn added: the hryvnia continues to lose ground under the pressure of growing demand for the currency from non-residents who are actively selling government bonds, withdrawing dividends and profits. Since the beginning of the year, the portfolio of hryvnia government bonds of non-residents has decreased by UAH 4 billion (about 4%).

“Demand for the dollar is also formed by power engineers who buy gas and coal, the situation remains difficult for the reserves of which. Importers have become more active,” Andriy Shevchyshyn analyzes.

What to expect next week

Experts’ forecasts are disappointing: the hryvnia will continue to devalue.

“The coming week will be negative for the hryvnia, we expect the average cash dollar selling rate to be UAH 27.75-28.10,” says Maxim Oryshchak. “The population is not the reason for the devaluation dynamics, that is, we do not expect an increase in demand for the currency from them. But business and speculators will provoke the hryvnia to fall.”

According to Andriy Shevchyshyn, the hryvnia weakening trend will continue next week.

“The exchange rate may move to the zone of UAH 28.2-28.3 per dollar. Much will depend on the National Bank curbing this trend with foreign exchange interventions to slow down the weakening of the hryvnia, as it did this week. And also on the activity of non-residents with energy companies” – summed up Andriy Shevchishin.

Even more pessimistic is Alexander Okhrimenko, who expects the hryvnia to weaken to UAH 28.5, despite the efforts of the National Bank.

Oleg Pendzin generally considers the situation difficult to predict, since it is not clear whether non-residents will continue to withdraw from Ukrainian government bonds, whether the National Bank will strengthen the hryvnia, at what dollar exchange rate the balance on the interbank market will be established. The expert expects that the regulator will be able to stop the devaluation and strengthen the hryvnia to at least UAH 27.5/dollar by the end of January. Otherwise, the yield of hryvnia government bonds will become negative in dollars, a mass exit of non-residents from them will begin, and this is already a disaster – there will be nothing to cover the state budget deficit.

Sell ​​or buy currency

Expert opinions vary.

Andriy Shevchishin advises to buy foreign currency, expecting its further rise in price, but at the lowest possible rate.

Alexander Okhrimenko predicts that after January 20, the hype will begin to subside, the rate will stabilize and go down after active sales of non-cash currency by the National Bank. For non-cash, the cash market will also go down, the rate may drop significantly below 27.5 hryvnia/dollar. And only after that, investments in the dollar will be justified.

Oleg Pendzin is sure: it is better to refrain from any cash transactions for the time being unless absolutely necessary.