Exchange rate in Ukraine: the hryvnia has dropped to a record low against the dollar. Moreover, experts anticipate further devaluation of the hryvnia. This information is reported by Kontrakty.UA.
What to expect in the upcoming week of January – in an exclusive from TSN.UA.
In December of last year, the cash dollar rate increased by 60 kopecks in sales and by 40 kopecks in purchases. For the entire year of 2024, the cash dollar rose by 4.30 UAH in sales and by 4.10 UAH in purchases. In the illegal market, the dollar only became more expensive in sales. From December 30 to January 5, the rate increased by 35 kopecks to 42.65 UAH/dollar. The minimum purchase rate during the week was on January 1: only 42 UAH/dollar (-32 kopecks) and the maximum on January 5: 42.45 UAH/dollar (+13 kopecks for the week). The National Bank ended the previous year with a record rate of 42.04 UAH/dollar, subsequently lowering it to 41.97, but on Friday, January 3, it was again 42.04. On Monday, January 6, the regulator set the official rate at 42.09 UAH/dollar (+15 kopecks for the week).
Financial analyst Andriy Shevchishin noted that the week between December and January was calm compared to the previous week when the National Bank sold 1.6 billion dollars from reserves, which is more than usual for a month. According to the expert, such significant expenditures from the NBU reserves should not occur in January.
"In December, the NBU sold 5.284 billion dollars from reserves, which is a record monthly volume in history; that’s why the hryvnia did not collapse, but only rose above 42 UAH/dollar," analyzes Andriy Shevchishin. "Can we afford such expenses? Yes. At the end of the year, foreign exchange reserves amounted to 42.8 billion dollars, which is sufficient. The main sales were to satisfy the demand for currency from importers, the population, and state companies (including defense)."
What to expect from the exchange rate
Experts expect further devaluation of the hryvnia this week, and January may become critical: it will be clear whether the hryvnia will depreciate gradually or whether there will be a sudden drop in the rate below 43 UAH per dollar.
According to Oleg Pendzin, a member of the Economic Discussion Club, the trend towards devaluation is evident in the actions of the National Bank, which set a noticeably lower official hryvnia rate for Monday, January 6, compared to the weekend.
"The official rate serves as a benchmark for the interbank market," analyzes Oleg Pendzin. "The cash rate is more dependent on the demand for currency from the population, which is currently insignificant in the new year. This week, large volumes of currency sales by the Ministry of Finance are expected to fund social payments, so the regulator will further devalue the hryvnia, which will affect both the interbank and cash markets. However, it won’t be substantial; the average sales rate will not exceed 42.60 UAH/dollar."
Andriy Shevchishin notes that currently, the supply of currency on the interbank market has decreased by 30%, while demand has dropped by 70%, so there is no panic in the cash market.
"From January 6 to 12, an increase in business activity is expected, while the cash market will remain quiet for now. It's hard to say how long this will last, but on average, the dollar will not be sold for less than 42.50 UAH."
Economist Andriy Zablovsky pointed out that the exchange rate corridor is gradually shifting upwards, currently holding noticeably above 42 UAH/dollar on the interbank market. It is evident that a slow devaluation of the hryvnia is occurring, which will continue in the cash market. The expert emphasized: while the transition period from holidays to increased business activity continues, it is difficult to predict whether the dollar will rise above the current 42.55 UAH per unit or if the current average rate will hold for a while longer.
To sell or to buy currency
Experts have summarized last year's results regarding the use of various financial instruments for investment. Oleg Pendzin, a proponent of investing in hryvnia, provided the following figures.
"A year ago, one cash dollar cost an average of 38 hryvnias, now it is 42.50, and the purchase rate is now 41.80-42.30 UAH/dollar. Thus, the profit from the increase in the rate amounted to 3.80-4.30 UAH per dollar or 10-11% annually. Last year, the average interest rate on hryvnia deposits was 13-14%, while on state securities in hryvnia (OVDP) it reached 20%. Therefore, investments in hryvnia were more profitable."
This year, the situation is different: deposit interest rates are lower, 11-11.5% annually for short deposits of three months, and the profit tax is higher. However, according to Oleg Pendzin, in the first three months of the year, the dollar rate will not rise above 43.5 UAH/dollar. This is within 2%, so it is evident that even deposits, not to mention OVDP, will yield greater profit in three months than buying currency now.
Andriy Zablovsky drew attention to the different trends between the dollar and euro exchange rates: while the American currency is becoming more expensive against the hryvnia, the European currency is depreciating.
"There are several economic and political reasons for the euro's depreciation; Ukraine has no influence on this, as the hryvnia exchange rate is tied to the dollar, not the euro. Therefore, if the euro falls against the dollar, it automatically falls against the hryvnia as well."
According to Zablovsky's forecast, the euro may depreciate further, but a parity situation where 1 euro equals 1 dollar is not expected yet. Therefore, the euro is currently attractive for those looking to purchase euro currency not for profit, but for future spending in EU countries: for education, treatment, travel, etc.
Andriy Shevchishin stated that last year Ukrainians bought 11 billion dollars more in cash currency than they sold, tripling the figure from 2023. The reason, in his opinion, is clear: the population is more concerned about not losing what they have earned during the war than about the ability to make money on "money". Therefore, even at the current high exchange rate, cash currency purchases will continue. However, experts still do not recommend selling currency without an urgent need. The exception is when the proceeds from the currency sale will be spent on specific projects.
Investment banker surprises with forecast for 2025
Let me remind you that recently an investment banker provided a forecast for 2025. According to him, the dollar exchange rate is expected to rise by another 10% to 46-47 hryvnias next year – a healthy process for Ukraine's economy. This will help manufacturers maintain competitiveness.
This statement surprised Tomas Fiala, director of the investment company Dragon Capital.
As Fiala noted, on one hand, it is beneficial for the National Bank to keep the rate sufficiently stable. At the same time, Ukraine has a significant trade balance deficit of 15% of GDP, which is covered by 40 billion dollars in international aid per year. According to him, Ukraine is guaranteed to receive this money next year.
"This is the first time we have such predictability. This also gives us comfort for our macro forecasts and for our investments. This is the first time during the war that we know, we are confident that our budget deficit will be financed not only for the next year but also for part of 2026. This is very good," explained the expert.