2.1 Forecasts of hryvnia
Ukrainian Banks Association forecasts negative aftereffects for hryvnia if the USA declairs its default.
This information was reported by president of Ukrainian Banks Association (UBA), Alexandr Sugonjako. “The price on dollar, that is expressed in other currencies, will fall after the default. I feel sorry for Ukrainians who have dollars in cash. But I think the USA will find the way out and all the markets will calm down. Default, no matter whether it’s technical or short-term, will cause distrust with dollar”, – he said. Sugonjako also reported that about 50% of Ukrainian gold and exchange currency reserves consist of USA securities. He underlined that the downfall of dollar will cause the collapse of stock markets in different regions, and the Ukraine is not an exception. President of UBA adviced to buy liquid assets.
On the 27th of July,2011 in most Kiev banks and exchange offices the purchase rate of 1 USD makes up 7.9900 UAH, the sale rate makes up 8.0000 UAH, as it was yesterday. In Ukrainian Banks and exchange offices the purchasing rate of 1USD is ranged between 7.9680 – 7.9900 UAH. The selling rate of 1 USD is ranged between 7.9950 – 8.0100 UAH. The euro rate grew by 11.00 kopeck and made up 11.5700 UAH. The sale rate increased by 3.00 kopeck and made up 11.6500 UAH. In Ukrainian Banks and exchange offices purchasing rate of 1 EUR is ranged between 11.4200 – 11.5800 UAH. The selling rate is ranged between 11.4700 – 11.6200 UAH [7].
III. The current situation of hryvnia
The devaluation of the hryvnia is of a situational character and not a stable trend, according to experts polled by Interfax-Ukraine.
"One should not assess the fall in the hryvnia exchange rate against the dollar as the start of a devaluation trend like that of 2008," the director of the treasury of Conversbank, Andriy Ponomariov, said.
"First, free hryvnias are needed to see the real devaluation, but there are no free hryvnias on the market: ending deposits on correspondent accounts of banks at the National Bank of Ukraine (NBU) are at a record low level of Hr 13-15 billion. It is unlikely that the NBU would actively replenish the system with hryvnias through long-term refinancing. Secondly, the high value of the resources in hryvnias and the absence of crediting of clients in foreign currency will stimulate banks to shorten their currency positions to the utmost – 10%, offering available currency risk hedging instruments to their clients," he said.
"I would not say that the hryvnia devaluation on the interbank is a trend. It is likely a situational event linked to tactics of the largest banks on the market," Deputy Board Chairman of Finance and Credit Bank, Serhiy Borysov.
The head of the treasury department at First Ukrainian International Bank, Anton Stadnik, said that the present hryvnia devaluation is of a seasonal character.
"In the second ten days of August and early September, business activity always stirs up, and the exchange rate always fluctuates. I think that in two days the market will calm down if no sharp fluctuations with ending deposits on correspondent accounts are seen," the expert said.
He did not rule out that the tactics of nonresidents on the stock market had affected the hryvnia exchange rate.
"One can assume that the failed auction of the Ukrainian Finance Ministry and withdrawal of nonresidents from government domestic loan bonds has affected the increase of the dollar exchange rate. As everybody knows, after S&P downgraded the United States' rating by one notch, serious fluctuations on all financial and stock markets were seen, which led to the decline of indices. Many investors prefer leaving high-liquid and risky assets, and hryvnia investment in government domestic loan bonds represent such assets for foreign investors," Stadnik said.
Analysts from Forum Bank do not forecast a further weakening of the hryvnia exchange rate in the near term.
"Of course, the exceeding of the psychological indicator of Hr 8/$1 could make many active players on the Ukrainian interbank market uneasy. We do not expect a further weakening of the hryvnia, as the NBU has enough instruments to retain the exchange in the range set in the national budget for this year," the analysts said.
A treasurer of Ukrinbank, Oleg Bronin, also said that the NBU's reserves are enough to smooth out sharp fluctuations of the exchange rate if required.
"The views of the market players for the short-term outlook for foreign currency movement moved towards a fall of the national currency exchange rate on a situational basis. However, I believe that this trend would not last for a long period of time, as forex reserves… allow the NBU to stabilize the exchange rate at Hr 8/$1," he said [6].