Hryvnia on steroids: why September is traditionally a month of currency optimism and what to expect in the currency market

September is usually a month of national currency strengthening. And this year was no exception. Olena Sosedka, a fintech expert and co-founder of Ukraine’s first fintech ecosystem Concord Fintech Solutions, told UNN in an exclusive comment about the factors influencing currency fluctuations and what the exchange rate will be in the near future.

At the beginning of August, we observed some weakening of the hryvnia exchange rate, but by the end of the month, we saw a trend towards its strengthening. The trend is accompanied by some fluctuations, but we can talk about the traditional strengthening of the national currency for this period. September can be called the time of the hryvnia “on steroids”, as its strengthening is facilitated by a number of factors at once.

According to the expert, the factors of hryvnia strengthening began to be laid down back in August, in particular, the NBU then sold a rather significant amount of foreign currency on the interbank market – almost 2.7 billion dollars, which allowed to strengthen the hryvnia. In addition, the regulator’s easing of some currency restrictions played an important role. And although on the one hand the hryvnia felt slight pressure due to the emergence of opportunities to withdraw funds, on the other hand, the NBU was able to stabilize the situation thanks to currency interventions, and in a strategic sense, such a decision by the National Bank contributed to strengthening confidence in the market.

Although the market experienced an increase in demand for foreign currency, it was not that significant. The excitement quickly faded. Recent NBU forecasts included expectations that relatively noticeable demand would persist, but there is no reason to believe that it will significantly affect the market now.

Today, as Sosedka explained, there is a seasonal revival of business activity, which is a stable factor that works to strengthen the hryvnia. Traditionally, the biggest impact on the exchange rate during this period comes from farmers – the active harvest is currently underway, which will lead to an influx of foreign currency earnings from exports.

“Significant export revenues will continue to strengthen the hryvnia. And this will allow the NBU to reduce the pace of foreign currency sales. But on the other hand, an increase in the number of interbank operations is common for this season, because the same farmers need fuel, which we import,” Sosedka explained.

Also significant for Ukraine in general and for the currency market in particular are the position of international partners on strategically important issues, which affects expectations, as well as the timely receipt of international assistance. In addition, the situation at the front also affects the exchange rate.

In this context, I want to add that in recent years, the defense industry has become a significant lever of influence on the economy – the activation of orders in this sector positively affects the situation.

According to her, the combination of all factors gives grounds for rather optimistic forecasts.

Significant fluctuations in the hryvnia exchange rate should not be expected in September. If the situation, in particular, at the front or at the international level, does not undergo sudden significant changes, then by the end of the month we will observe fluctuations in the corridor of 41.3–41.5 UAH/USD. But in October, the hryvnia may weaken to 42 UAH/USD.