Page 43 - UKRRptSept18

hryvnia's forex rate, which intensified in the same week due to the further excess of demand for currency over its supply.
The hryvnia quotations against the dollar on the interbank currency market by the close of trade settled at UAH 26.98/27.00 to the dollar on August 1. The National Bank of Ukraine lowered the official hryvnia exchange rate by 10 kopiykas, bringing the national currency to UAH 26.96 to the dollar.
But Investors and bond traders were jittery after the first week of August when the hryvnia fell below the psychologically important UAH27 to the dollar mark.
Analysts say the slip in the currency was part of the natural devaluation that happens in the autumn when tax bills come due, but the seasonal trend was starting early this year.
The fall was also linked to a moderate fall in the country’s gross international reserves (GIR) to $17.748bn and closer to the three months import cover economists believe is needed to ensure the stability of the national currency.
On a 12M basis Ukraine’s current account deficit amounted to $2.8bn, up from $2.4bn last year. Ukraine’s current account was reported in deficit of $125mn in June. At the same time, it was a reversal from $23mn surplus posted a year ago.
“In line with previous month, growing trade deficit was the main culprit behind worsening current account performance. At the same time, trade deficit slightly improved comparing to numbers reported a month ago, Ukrsibbank said in a note.
“While external trade continues to worsen, resilient export prices will help to offset (albeit partly) negative impact coming from accelerated consumer imports and higher energy prices. The risks to FX rate stability are increasing and we expect another round of renewed pressure on UAH, retaining our end-year USDUAH forecast to 29.50,” the bank added.
More worryingly the Central banks treasury account – the account it uses to make day to day payments -- fell close to zero this week: Ukrainian is facing the sovereign equivalent of a cash flow crisis.
“We expect hryvnia devaluation to lose steam in the nearest future, provided the withdrawal from the market large amounts of banking liquidity via accelerated selling of the FX currency on the market in the form of NBU interventions,” Ukrsibbank said in a note.
The NBU resorted to three currency auctions during only one week ending August 3 and has started to use this tool for the first time since April.
At the first auction last week, the central bank intended to sell $50mn, nevertheless auction resulted in only more modest $28.1mn of sold foreign exchange currency from international reserves.
In the second auction NBU initially wanted to sell $100mn and the demand from the banks exceeded that volume, resulting in the NBU netting the full $100mn.
43 UKRAINE Country Report September 2018 www.intellinews.com