March is shaping up to be a challenging month for Ukraine’s currency market as businesses grapple with rising operational costs and the National Bank of Ukraine (NBU) prepares to maintain its monetary policy. The ongoing energy crisis has forced many small businesses to rely on generators, further increasing demand for foreign currency needed for fuel imports.
Key Issues:
- Energy Strain: The reliance on generators has heightened the demand for currency to import fuel and energy resources.
- Price Expectations: Companies are anticipating price increases that exceed official inflation rates, driving up currency demand.
- NBU’s Decision: The NBU is expected to keep the key interest rate at 15% during its upcoming meeting on March 19 to stabilize the market.
- March Forecast: The exchange rate for the dollar is projected to be between 42.5 and 43.7 UAH, while the euro is expected to range from 50.5 to 52 UAH.
According to economist Lesovyi, March will likely see heightened tension in the currency market, but the NBU’s mechanisms for mitigating exchange rate risks remain effective.
Despite the challenging conditions, scenarios predicting a sharp depreciation of the hryvnia appear unlikely at this time.
Economic Challenges:
The energy crisis has forced many small businesses to operate on generators, leading to increased logistics and fuel costs across all sectors.
Inflationary Pressures: Businesses are factoring in price hikes that surpass the official inflation rate, which is creating additional currency demand from both companies and consumers.
External Imbalance: Imports are significantly outpacing exports, with Ukrainian agricultural and metallurgical producers facing barriers to EU markets due to quotas and trade disputes.
NBU’s Strategy and Interest Rate:
Lesovyi noted that during the forthcoming monetary committee meeting on March 19, the NBU is likely to maintain the key interest rate at 15%. This decision aims to bolster the hryvnia’s stability and mitigate the risks of currency overheating.
Risks: Lower interest rates could stimulate lending but may also exacerbate inflation and currency demand.
March Exchange Rate Forecast:
The currency market is expected to remain within the following projected ranges:
- Dollar: 42.5-43.7 UAH;
- Euro: 50.5-52 UAH.
While some volatility is anticipated, the NBU’s established framework should help balance inflation control and economic protection amid ongoing energy challenges.
Ukraine's currency market is under pressure this March due to rising operational costs linked to energy shortages. The National Bank is set to maintain its interest rate to stabilize the hryvnia amid these challenges, with exchange rates expected to fluctuate within defined ranges.