The national Bank buys currency and the dollar is falling: experts explained the situation

Нацбанк скупает валюту, а доллар падает: эксперты объяснили ситуацию

NBU policy should promote the lending business, said the experts

The national Bank of Ukraine (NBU) last week (1-5 July) bought 321.2 million dollars on the interbank currency market, which is more than seven times the amount of the purchase a week earlier. To assess the appropriateness of the actions of the regulator the website “Today” asked the experts.

In the opinion of a specialist sales of debt securities at Dragon Capital Sergey Fursa, the national Bank is doing the right thing, as it “catches” the opportune moment. For now, the dollar declined to lows 2016-2017

“It’s very good – the national Bank replenishes its foreign exchange reserves. This is because there is an active inflow of funds of foreigners who buy government bonds, denominated in local currency This leads to the fact that the hryvnia is strengthened”, – said Fursa.

As you know, Ukraine now needs to replenish reserves, because 2019 is the peak for the payment of external debt.

“Over the last two weeks, the portfolio of government bonds owned by non-residents increased by 340 million. and the volume of currency interventions of the NBU for the same period amounted to 365 million dollars”, – adds Tatiana Bogdan, doctor of economic Sciences, head of Department public Finance Expert-analytical center “Optima”.

Activation investors, she says, in particular, has contributed to the accession of Ukraine to the international Depository Clearstream. And given the fact that the foreign exchange reserves, according to Bogdan, are “unsatisfactory”, while non-residents can start at some point, surely out of government bonds, the Governor’s actions make sense.

“The policy of replenishment of international reserves of Ukraine by the National Bank, which is held in such circumstances, is justified because the foreign exchange reserves now account for only 45% of short-term external debt of the country (when maximum allowable level of 100%). In addition, one should not exclude the scenario of sudden exit of residents from the hryvnia market segment government bonds, which will increase the demand for foreign currency and would require selling of currency interventions of the national Bank”, – says Bogdan.

In addition, the concomitant impact of such foreign exchange intervention is the release into circulation hryvnia money supply, which is also a plus.

“Given that the ratio of the money supply MZ of gross domestic product (GDP) of the country is now quite low at around 37%, the influx of additional funds into circulation is assessed positively,” – said the expert.

At the same time, Tatiana Bogdan reminds the General business climate in the country and the policy of the Bank to promote Bank lending to businesses, and not result in accumulation in financial institutions excess liquidity or to increase contributions in the short-term speculative transactions (in particular, through expansion of portfolio of Deposit certificates of the NBU).

The experts do not give opinions about what is buying currency a national Bank could lead to the devaluation of the hryvnia.