NBU hryvnia exchange rate: commercial = official
The National Bank raised the official hryvnia-dollar exchange rate by 25%. As of 9:00 AM on July 21, 2022, the exchange rate for one US dollar was 36.5686 hryvnias. This rate is very close to what has been seen recently at exchange offices.
The measure is necessary to balance the money market in the context of war and to ensure additional conditions for maintaining the stability of the Ukrainian economy. Let's examine this issue in more detail and consider whether the exchange rate alignment is beneficial for IT professionals.
Follow us atFacebook,Telegram,Twitter,Instagramto receive verified information in a timely manner.
Reasons for adjusting the fixed exchange rate level
Since the start of the full-scale warNBUfixed the exchange rate at 29.25 UAH/USD. This played a significant role in ensuring the smooth operation of Ukraine's financial system.
The exchange rate peg allowed for economic stabilization. However, during the five months of war, the economies of our country and many countries around the world underwent significant changes.
This necessitated an adjustment to the fixed exchange rate of the Ukrainian hryvnia to the US dollar.Now 1 dollar at the official exchange rate costs more than 36 hryvnias.
What do experts predict?
Many, having learned that the NBU was weakening the hryvnia, rushed to currency exchange offices to buy American currency. This immediately impacted the black market: within hours, the exchange rate rose to almost 40 and even 50 hryvnias per dollar.
Experts predict a short-term surge. The situation should stabilize in a few days, with the dollar falling to 36-37 hryvnias.
Moreover, if export volumes increase and Western aid supplies continue, the exchange rate could fall to 32 hryvnias per dollar.
Why did the NBU raise the hryvnia to dollar exchange rate?
Maintaining the official exchange rate at 29.25 was very costly for our country's foreign exchange reserves. Therefore, the National Bank decided to raise the dollar-to-hryvnia exchange rate by 25% immediately.
This decision reflects negative changes in the Ukrainian economy and the significant strengthening of the dollar against global currencies during Russia's full-scale war in Ukraine: the euro-dollar exchange rate has fallen by 12% over the past five months.
According to the NBU Governor, “the new exchange rate will become an anchor for the economy and will give it stability in a climate of uncertainty.”
The National Bank believes that “continuing the fixed exchange rate policy” will help control inflation dynamics, “as well as maintain the smooth operation of the financial system.”
In other words, such actions should have a positive impact on the current state of our economy and accelerate its stabilization.
The Pros of Exchange Rate Adjustment
- Increasing the competitiveness of domestic producers and increasing the inflow and, accordingly, the sale of foreign exchange earnings by exporters.
- Bringing exchange rates closer together for different business groups and ordinary consumers.
- Minimizing the speculative component of market participants' behavior and stabilizing expectations.
- Supporting the sustainability of an economy forced to function in war conditions.
Is exchange rate alignment beneficial for IT professionals?
Yes.
Entrepreneurs working in the IT sector were forced to bear the brunt of the unfavorable exchange rate. The difference between the official and commercial rates was approximately 20%.
As we can see, sole proprietors suffered significant losses due to unfavorable exchange rates when converting funds received for services. Many considered the exchange rate policy in effect to be an additional discriminatory tax.
Aligning the exchange rate and raising the official value of the currency to the market value will certainly help minimize losses when withdrawing funds from sole proprietorships' business accounts.
Will the new rate trigger a price hike?
There are concerns that adjusting the official exchange rate of the national currency will trigger a price hike. Experts believe this will not have a significant impact on price dynamics.
At the same time, by fixing the exchange rate at a new, more stable level, the NBU will be able to more easily control these dynamics and, therefore, maintain the stability of the financial system.
According to financial analysts, the NBU made a balanced and calculated decision. Ukraine's gold and foreign exchange reserves, taking into account foreign financial aid receipts and increased exports, are sufficient to meet these goals.
Incidentally, on July 22, NBU Governor Kyrylo Shevchenko announced that since the start of military action, our country has received $12.7 billion in financial assistance. The total amount of announced financial support from Western countries is $27 billion.
Will the exchange rates for buying and selling currencies change?
No.
The conditions for setting exchange rates for foreign currencies will remain unchanged. This applies to both the cash and non-cash segments of the foreign exchange market.
Cash segment
The rate will continue to be determined by the level of supply and demand.
Non-cash segment
Banking institutions must continue to sell and buy foreign currency based on customer requests at a rate that may deviate from the official rate by no more than 1%
Balance of supply and demand in the foreign exchange market
The NBU has developed additional measures to stabilize the foreign exchange market, which are designed to balance supply and demand.
- The bank can sell non-cash currency to citizens for subsequent placement in a deposit account.
Conditions for opening such a deposit:
- term - from 3 calendar months;
- monthly currency limit — equivalent to UAH 50,000;
- Early termination is impossible.
- A number of restrictions have been established on the spending of international reserves. This will minimize funding for areas that are not a priority during wartime.
- The algorithm for calculating open foreign exchange position limits by banks has been changed. This will help reduce potential demand for foreign currency. The new regulation will take effect on August 1, 2022.
- Additional decisions have been made to minimize the unproductive outflow of currency, including within the framework of “card tourism.”
- From July 25, 2022, commercial banks will no longer be able to purchase hryvnia cash from foreign financial institutions using non-cash foreign currency – this permission has been revoked.
According to the NBU, "all restrictions introduced since the beginning of the war are temporary." They are aimed at "balancing the foreign exchange market situation" and supporting the domestic economy.
What will happen to the exchange rate of the euro and other currencies?
According to financial analyst Mykhailo Demkiv, the exchange rate for the euro and other currencies will, as before, be set based on cross rates.
A cross rate is the relationship between two currencies, determined by their exchange rate against a third currency (primarily the US dollar).
Calculation example
NBU exchange rates as of July 21, 2022:
- 1 US dollar – 29.25 UAH
- 1 euro = 29.81 UAH
That is, 1 EUR = $1.02. After lunch, the NBU will set the official EUR exchange rate for the following day, July 22, at 37.30 (36.5686 x 1.02).
Conclusion
Business always adapts to war. We hope that prudent financial policies by the government and the National Bank, as well as the support of the international community, will help maintain the resilience of the Ukrainian economy during the war.
The fixed official exchange rate of the hryvnia to the US dollar should increase the competitiveness of Ukrainian manufacturers. And for IT professionals, it should minimize losses associated with exchange rate differences when receiving payments for services.
Entrepreneurs who continue to grow their businesses in Ukraine and pay taxes need tools for stable operations. One of them is a reliablewebsitewith classdomain, hosted on a securehosting.
Security of transactions is ensured bySSL certificate, and registrationtrademarkguarantees the safety of doing business.
In the companyNIC.UAAll the listed services can be purchased on favorable terms.
We remind you thatThe discount is valid until July 31, 2022.0.2— take advantage of this great offer!
