Page 49 - Eastern Europe Outlook 2020

● FX
The hryvnia was one of the best performing currencies in the world in 2019 after it gained over 15% and crossed the psychologically important UAH24 to the dollar mark in December.
The strength of the hryvnia was becoming a problem as 2019 came to an end, depressing exports and sucking in imports. The NBU began to intervene in the currency market more frequently and will almost certainly continue cutting the monetary policy rate in 2020.
The forecast for 2020 is for the hryvnia to remain steady around UAH24 to the dollar.
The hryvnia strengthened due to several reasons. In October-November, the excess supply of foreign currency was mainly driven by proceeds from Ukrainian exports, in particular thanks to a record harvest of grain and oil crops, and selling foreign currency coming from borrowings of state-owned companies.
Foreigners have invested a total of $4bn into hryvnia government bonds and been a major source of inbound currency but this did not have a major influence on the foreign exchange market, unlike in previous months, according to the NBU.
At the same time, the central bank actively purchased excess foreign currency to replenish international reserves – a policy it intends to continue into the first quarter of 2020. Net foreign exchange interventions have totalled over $5.5bn in 2019.
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