Overview and Forecast of the Hryvnia Exchange Rate Against Major Currencies by KYT Group Analysts

In the first half of August, Ukraine's hryvnia exchange rate against the US dollar remained relatively stable, hovering around 44.70 UAH/USD, despite attempts to break through the 44.83 mark. This stability was achieved through the National Bank of Ukraine's (NBU) active participation in interbank foreign exchange market trading. The bank sold approximately $2.11 billion worth of foreign currency to importers through interventions, which is nearly the same amount as sold during the last two weeks of July ($2.15 billion).

The NBU's interventions helped maintain exchange rate stability, with the bank acting as the primary market maker. However, a significant challenge for Ukraine's economy and foreign exchange earnings is the disruption in agricultural exports due to Russian attacks on the country's port infrastructure and ships. In July and early August, Russian attacks halted agricultural exports, causing a 75% year-over-year decline in the first two weeks of August.

This situation threatens to result in a buildup of grain in warehouses and substantial losses for agricultural companies. Nevertheless, the NBU is actively managing the situation and expects no significant impact on exchange rate fluctuations.

Looking ahead, global capital markets are eagerly awaiting the Federal Reserve's September meeting, where a decision on interest rate changes may be made. However, there is currently no certainty of a rate change. Analysts predict that the Fed may keep rates unchanged, given recent data showing a decline in U.S. inflation for the second consecutive month. The U.S. Consumer Price Index rose 3.4% year-over-year in July, down from 3.5% in June.

In addition to exchange rate concerns, rising tensions in the Middle East and volatile oil prices have impacted Ukraine's economy. Brent crude reached $88.44 per barrel on August 17, influenced by the situation in the Strait of Hormuz. Iran has not lifted its blockade of the strait, despite U.S. President Donald Trump's remarks about the possibility of establishing control. As a result, the EUR/USD pair has been trending toward a weaker dollar in August, with the exchange rate at $1.1594 per euro by August 17.

The NBU has recently announced easing measures for foreign exchange restrictions on individuals, with the limit on non-cash foreign currency purchases increasing from 50,000 UAH to 200,000 UAH per month. The daily limit on cash withdrawals from foreign currency accounts is also being raised from 100,000 UAH to 200,000 UAH. This package of foreign exchange liberalizations is expected to generate only moderate additional demand for foreign currency, which is insignificant compared to the size of the foreign exchange market.

Ukraine continues to receive international financial support, including a 3.47 billion euro tranche from the EU as part of the Ukraine Support Loan. This aid is intended to finance Ukraine's defense needs, such as missiles, air defense systems, fighter jets, and drones. The International Monetary Fund (IMF) loan disbursements and tranche frequencies depend on compliance with the EFF program's conditions.

Two more reviews of the program's implementation with the IMF are scheduled for 2026, with potential disbursements of over $2.4 billion from the Fund, should all conditions be met on time. Despite the pressing economic challenges faced by Ukraine due to Russian aggression, the country's exports remain a crucial aspect of its economic landscape.