The foreign exchange market is extremely volatile.
In times of crisis, it can seem that buying foreign currency is the best solution to protect your savings. Together with experts, we explain why this solution is far from the best.Due to the constant threat of Russia's invasion of Ukraine, the foreign exchange market is extremely unstable. As soon as there is news about the bringing of new troops, the possible date of the attack, the hryvnia depreciates. And vice versa, news about the withdrawal of troops or support from international partners strengthens the hryvnia.
What devalues the hryvnia
Panic over about the possibility of Russia's invasion of Ukraine led to exit of non-residents from the Ukrainian market and the sale of government bonds. As of February 17, the volume of government bonds in the portfolio of non-residents amounted to UAH 77.48 billion. This is 15% less than at the beginning of the year, according to the NBU. This is important because non-residents, based on the Ukrainian market, sell the hryvnia and thereby depreciate it.
An additional factor for non-resident exits is the global trend. Fed (the central bank in the US) may raise interest rates in the near future and generally begin a policy of fighting inflation. Therefore, developed markets will become more attractive for investors.
Energy prices have become an equally important factor for the depreciation of the hryvnia. Oil prices have already soared above $90 a barrel. Interestingly, the situation with a possible invasion also affects the global oil market, and prices can even reach the $100 level.
What strengthens hryvnia
However, along with negative factors, there is something that does not allow the hryvnia to soar above 29 per dollar:
- the activities of farmers who fill the budget;
- the price of ore, which brings high profits to metallurgy;
- NBU activities.
Pay attention! In early February, Ukraine's gold and foreign exchange reserves amounted to $29.29 billion. That is, the National Bank has enough opportunities to contain the exchange rate.
Why you shouldn't buy dollars
Ukrainians who are now buying up foreign currency harm both themselves and the country's economy. It is important to understand that when everyone buys currency, the hryvnia depreciates sharply. The NBU is forced to ruin its gold and foreign exchange reserves in order to keep the course. And people in a panic from the growth of the exchange rate are even more buying up the currency already at an inflated level. Thus, when the situation stabilizes and the exchange rate rolls back, someone will lose part of their savings.
Andriy Tabinsky, Advisor to the Head of the Lviv Regional State Administration, in a comment on Channel 24 said that he personally sees no need to hand over the hryvnia.
The NBU, the activities of our agricultural and metallurgical sectors will keep the dollar-hryvnia ratio at the usual level. If there is no need to make purchases in foreign currency in the near future, you can keep the hryvnia and help the economy with your own position.
Andriy Tabinsky, Advisor to the Head of the Lviv Regional State Administration, entrepreneur, investor
He also emphasized that the dollar is a dubious currency on world markets, because the US now has the most debt in history — $ 30 trillion, and the Fed is still not able to deal with inflation, which is held at 7%.
Remember! The US reached a 40-year high in January of this year — 7.5% year on year.
Forex Club Libertex Analyst Vitaliy Minko argues that buying currency now is not the best solution, since the rate is already overvalued.< /p>
The current exchange rate of the hryvnia includes already embedded risks regarding the situation with Russia. If now it is too late to buy currency specifically for the idea of developing a conflict, the market has already taken this into account. If in order to diversify your savings is a good idea. Since the risk of different economies will offset the depreciation of one currency by increasing the price of another.
Vitaly Minko, Analyst of Forex Club Libertex
The analyst advises creating a multi-currency basket of at least 4 currencies: dollar, euro, Swiss franc and hryvnia.
Interesting! Analyst Vitaliy Minko argues that if it were not for the threat of a Russian invasion, the dollar could now be worth less than 26 hryvnia. But the psychological factor brought the hryvnia back to the level of 2020.
Anna Zolotko, director of treasury operations at Unex Bank, says that the decision to buy the dollar or not should be made depending on the goal:
- < li>If this is a small amount that you are already planning to spend so soon, then there is no point in buying dollars. On the contrary, due to high volatility and large spreads, there is a chance to lose money if you change dollars back into hryvnias.
- As for large amounts, each person should make a decision, taking into account their own understanding of the likelihood of events developing in this or that way. another scenario.
If the situation calms down in a few days or even weeks, the hryvnia will quickly regain lost ground. In such conditions, buying currency now, when the rate is clearly too warmed up by psychological factors, is not the best investment strategy … In crisis situations, like the current one, usually only professionals earn money for whom buying and selling currencies is work.
Anna Zolotko , Director of the Department of Treasury Operations of Unex Bank
Important! The Armed Forces of Ukraine are ready to resist the Kremlin's aggression and defend our land. In addition, international partners support the sovereignty and territorial integrity of Ukraine and are ready to impose new enhanced sanctions against Russia.