USD/UAH: Foreign reserves at all time high and continue to rise
Short-term risks to hryvnia are limited. Foreign reserves neared $39bn in June, an all-time high. External financial aid more than balances the costs of stabilising the currency. The National Bank of Ukraine is planning to liberalise the exchange rate, but in a gradual manner.
Long-term prospects of the hryvnia are mixed. The government will balance the negative trade balance with a massive inflow of foreign aid. It will be a political choice whether the foreign funds are converted via the market (supporting the hryvnia), or in the central bank. Given the scale of war damages, we expect the government to largely opt for the latter, to boost Ukraine’s trade competitiveness and support an economic recovery.
