The hryvnia has two main scenarios for the development of the situation, which are completely dependent on the financial policy of the authorities
In the light of the events that took place over the past month in Ukraine, the general situation for the future hryvnia exchange rate has changed dramatically. The "market", represented by people who buy and sell the hryvnia, reacted negatively to the change of the head of the National Bank. Due to this, they have a huge number of fears about the future financial policy of Ukraine as a whole. At the same time, the hryvnia fell against the dollar, even despite the positive external and internal market conditions during this period.
Without the shock associated with the National Bank, the hryvnia, most likely, using the growth of "risk appetite" in the world and the inflow of money to developing markets, could strengthen to the level of 25,5-26 hryvnias per dollar. But this did not happen, because, regardless of the success of the country's balance of payments, people sold the hryvnia. And therefore, instead of strengthening, the hryvnia fell to 27,8 hryvnias per dollar.
The difference between the current exchange rate and the hypothetical exchange rate that could exist under other circumstances was approximately 2 hryvnias. This is the price of people's "fear" about the country's future financial policy. Unfortunately, the market has shown that it does not trust the new head of the NBU and the actions of the country's authorities. But this is not a catastrophe for Ukraine, because the authorities can pursue different policies and everything is in their hands.
In this context, the hryvnia has two main scenarios for the development of the situation, which are completely dependent on the financial policy of the authorities
- negative, in which all the fears of the investment community are realized. In this case, the exchange rate will go up by 30 or more, up to 45 hryvnias per dollar, since there is no smoke without fire.
If the country's authorities stand on the rails of the "printing press", confrontations with international financial institutions and will disappoint the market already with their actual actions and thus justify the negative expectations of the market, then this will not be limited to one action. One action will be meaningless without a whole chain of decisions and events. As the authorities disappoint investors, the hryvnia will continue to fall.
But I believe that the negative scenario will not be implemented, since such a scenario will not benefit anyone, and will be suicidal not only for the financial situation of the country, but also for the government itself.
Neither the new head of the National Bank of Ukraine, nor President Volodymyr Zelensky, nor anyone else who manages the country's financial policy today, will cross an unacceptable line, because it will be counterproductive for everyone, and there will not be a single beneficiary.
It would be completely illogical and completely absurd to lose all the achievements made over the past time. If the authorities of Ukraine would like to refuse cooperation with the International Monetary Fund, or pursue a counterproductive policy, which is sometimes voiced by people who do not directly influence the financial policy of the state, then the question arises, what were the previous reforms for? For the authorities of Ukraine, in this context, then there would be no sense in adopting the unpopular land law and the so-called "anti-Kolomoi" law.
Nevertheless, the market was scared, and therefore the new head of the NBU, Kirill Shevchenko, currently has a difficult secret task - to restore people's confidence in the hryvnia and dispel fears about the future financial policy of the state. And he has already taken the first steps in this direction.
At the last NBU meeting, contrary to market expectations, the regulator did not further reduce its base rate, keeping it at the previous level of 6%. With this, the NBU gave a signal that it does not have a goal to flood the economy with liquidity at any cost. And, even despite the words of the president about the desire to "crush the banks" and start lending in the country, the NBU will be restrained in its actions.
With its restraint, the NBU partially calmed the market and partially stopped the growing wave of fears regarding the future policy of the department. Due to this, after the NBU meeting, the hryvnia began to strengthen again. And most likely, over time, as confidence in Ukraine is restored, the hryvnia exchange rate will be able to strengthen to the level of 25-26 hryvnias per dollar. Since according to other indicators, including the surplus balance of payments, the hryvnia still tends to strengthen.
But time heals. If the NBU does not commit erroneous actions, and the government does not remain in the fairway of the policy of cooperation with the IMF and other financial organizations, the confidence of investors will be restored. This will gradually lead to the strengthening of the national currency of Ukraine.
You should not count on a strong strengthening of the hryvnia, because even if all financial indicators will contribute to a strong growth of the national currency, it will not be allowed to do so under the new conditions. All the strength and energy of the hryvnia, which will vote for an exchange rate below 25 hryvnias per dollar, will most likely be transformed into an increase in the country's gold and currency reserves.
As for the desire of the country's authorities to start lending, there is no doubt that Shevchenko perfectly understands that this problem cannot be solved simply by flooding the economy with money. The best option for stimulating lending is the way to improve the country's legislation and balance the rights of creditors and borrowers, as well as loosening regulatory requirements for banks to create market conditions for the growth of lending.
I hope that the head of the NBU will act in this direction. But even if the country's authorities in some way stimulate lending in another way, in the current situation they will not be able to do it in an excessively large volume, which would change the schedule for the situation with the hryvnia.
In view of the above, in the next six months, the hryvnia will trade against the dollar in the range of 25-29 hryvnias per dollar.
But there is also a third variant of the development of events for the hryvnia exchange rate, which may begin to be realized either at the end of this year or already next year.
It consists in the fact that the exchange rate of the American dollar on the world market, regardless of Ukraine and the hryvnia, has changed. Today, there are quite serious reasons to believe that the US dollar will fall in value as the world economy recovers after the corona crisis. If this happens and the dollar falls, the hryvnia may strengthen even more.
But this very much depends on what goals will be more important for the National Bank in the future. If the NBU, at the head of the corner, sets a goal in the form of price stability, the hryvnia exchange rate may strengthen even below the exchange rate of 25 hryvnias per dollar.
Mikhail Fedorov, analyst of IG Univer, publication "Liga.Finance"
