Political stabilization, Russia's support and stirring up of NBU will stop hryvnia devaluation, say bankers
The stabilization of the political situation in Ukraine, financial support by Russia and stirring the National Bank of Ukraine (NBU) into action will stop the devaluation of the hryvnia, bankers polled by Interfax-Ukraine have said.
"The main reason why the hryvnia exchange rate is weakening is the total absence of reference points for the market, first, from the NBU. A certain impasse is seen in the political situation. In addition, the small hope of support for the exchange rate that was seen in December disappeared due to the complete vagueness of the situation around the government and the wait-and-see attitude of Russia," an analyst from UniCredit Tanteli Ratovohery said.
"The prime cause of the hryvnia weakening early this month was the seasonal factor – the sharp decline in exports payments early in 2014. However, political factors started to affect it later: the standard behavior of economic agents – to buy foreign currency in periods of economic and political instability. Taking into account the low level of reserves and non-payment of $2 billion by Russia, the NBU does not have much chance to support the exchange rate," the head of the analysis and research department at Raiffeisen Bank Aval Dmytro Solohub said.
He said that the further devaluation of the hryvnia could be stopped if the political crisis begins being solved and Russian aid is resumed.
"The political situation should stabilize. We have no other option. A certain compromise has to be found. Today's pressure [on the exchange rate] will pass… The most frightful thing is when you cannot see when and where it will end," Ukrgasbank Board Chairman Serhiy Mamedov said.
"We've passed the line of a rational exchange rate, and a revision should be seen for sure," he said.
The banker noted that an overly weak exchange rate causes inflation and additional demand for foreign currency.
"If the situation continues, this is not favorable for anyone. This is favorable only for the enemies of the state who want to destroy it or make things worse," Mamedov said.
He said that today the main demand for foreign currency comes from the public.
The banker said that the current situation brought a certain increase in activity on the property market: some individuals are mulling investment of funds in property as a way to save money along with the reduction of the political and economic stability.
"Today we had a client – a large construction company. They said that they haven't had such business for a long period of time – people are buying everything," Mamedov said.
Head of the supervisory board of Pivdencombank Ruslan Tsyplakov said that high hryvnia liquidity also pressed on the national currency exchange rate.
"In December 2013, the NBU issued a large refinancing credit – UAH 27 billion, and correspondent accounts expanded. Companies have a lot of money accumulated and they are not ready to invest, which shows the pace of deposits of companies, which posted a rise of almost UAH 16 billion in December. In the present conditions, the game of the decrease of the exchange rate on the currency market and investment in consumer crediting become attractive," the banker said.
Experts expect that the NBU will take a set of measures to stabilize the hryvnia exchange rate in the near term.
"Today, there are more factors for growth of the hryvnia exchange rate than factors for its stabilization. Only more decisive regulatory acts of the NBU could hinder the further climbing of the exchange rate," Ratovohery said.
Tsyplakov said that the NBU could narrow hryvnia liquidity, which will weaken the pressure on the national currency.
"The best decision for the NBU in the conditions of monetary expansion which is not swallowed by the real economic sector will be the temporary retaining of the pace of growth in hryvnia liquidity. In this case, a shortage of hryvnias will promote the strengthening of the hryvnia exchange rate," he said.
He said that if the main political forces were able to find a compromise in the near term, the hryvnia exchange rate could fall to UAH 8.20-8.40/$1.
Deputy Board Chairperson of Ukrgasbank Olena Dmitriyeva said that the introduction of administrative restrictions by the NBU could just stir up more panic.
