Page 37 - UKRRptAug19

7.0 FX
The Ukrainian hryvnia is flying this year as foreigner investors pile into the local bond market following its tie up with international payments and settlements system Clearstream. “The Ukrainian hryvnia continues to strengthen, today crossed UAH25/$1. It was last this strong three years ago in August 2016. The hryvnia has strengthen 10.7% in relation to the $from Jan 1, 2019,” Anders Aslund is a Swedish economist and a Senior Fellow at the Atlantic Council said in a tweet. The hryvnia has strengthened by 9.6% YTD against dollar as foreigners keep pumping money into hryvna denominated so-called “Borscht bonds,” according to ICU in Kyiv. Foreign investors have already bought some $2.5bn worth of local bonds and their share is now circa 7% of the total bonds outstanding from next to nothing a year ago. “Despite already purchasing $2.5bn into reserves, the National Bank of Ukraine (NBU) has been criticized for buying too little allowing hryvnia to appreciate too much,” ICU said in a note.
Balance of Payments fundamentals support UAH. After peak debt repayments in May of $1.8bn, the balance of payments cumulatively turned to a small deficit of $0.5bn. After the first five month of 2019, the financial account deficit amounted to $0.7bn vs $0.8bn surplus in Jan-May 2018. But EUR1bn from Eurobond placement in June is likely to cover that cumulative deficit. $5.1bn remittances from labour migrants fully covered the widening trade deficit of -$3.2bn, thus the current account remained positive and cumulatively amounted to $0.3bn, significantly exceeded the previous year’s value of -$0,5bn. Therefore, the fundamental situation remains favourable for further UAH FX rate strengthening and accumulation of international reserves, which rose by $1.4bn in June, mainly due to the issuance of Eurobonds and the non-resident portfolio inflows to the UAH bond market.
Ukraine’s hryvnia ranks as fourth best performer against US dollar so far in 2019 . The Ukrainian hryvnia is the fourth-best performing currency in the world against the dollar this year, according to data compiled by business news outlet Bloomberg. Ukraine’s national currency has advanced around 5.5% against the dollar during the first half of 2019, with gains of 2.5% in the month of June alone. The current strength of the hryvnia is helping to drive demand for Ukrainian government bonds. Non-resident investments in Ukrainian bonds have soared over nine-fold since the start of the year to reach approximately USD 2 billion, according to figures released by the National Bank of Ukraine in early July.
Ukraine’s hryvnia appreciated 5.5% against the dollar during the first half of this year , according to data from the National Bank of Ukraine. During the same time, the hryvnia appreciated 1.1% against the euro. In June, the hryvnia strengthened against the US dollar by 2.5%.
The National Bank of Ukraine (NBU) has cancelled all limits on repatriation of dividends , "in line with the currency liberalisation and for improving the investment climate," the regulator said in a statement on July 9. The decision takes effect on July 10. From this date, business with foreign capital is no longer subject to the limit of €12mn per one legal entity on transferring dividends abroad or to non-resident accounts in Ukraine. In May, the regulator increase the limit on dividend repatriation to €12mn from €7mn
37 UKRAINE Country Report August 2019 www.intellinews.com