Cash dollar rates have once again started to rise in Ukraine

In Ukraine, the cash dollar has started to rise in value once again.

On September 19th, its exchange rate on the black market increased from the morning rate of 38.40 UAH/$ to a peak of 38.70 UAH/$, only slightly retreating to 38.60 UAH/$ by evening. This is higher than the previous day’s rate when the dollar increased from 38.23 UAH/$ to 38.48 UAH/$ and also higher than the rates of the previous week when it ranged from 37.90 UAH/$ to 38.22 UAH/$.

Bank cash rates have also noticeably increased, going from 38.80 UAH/$ to 38.90-38.95 UAH/$.

This increase in the dollar’s value is described as emotional and is attributed to new public expectations regarding Ukraine’s transition to a floating exchange rate of hryvnia/dollar in the interbank market, which is currently restricted by the National Bank of Ukraine. Alternatively, it may be due to the possible increase in the official fixed exchange rate of hryvnia/dollar from the current 36.6 UAH/$ to new levels. Moreover, the National Bank recently suggested that the market should anticipate a rate of 41.2 UAH/$ by the end of 2023, while the Ministry of Finance openly forecasted a rate of 41.4 UAH/$ for 2024.

“Rumors have heated up, and not only ordinary people but also bankers from other departments are coming to the treasury and asking, ‘Is it true that a flexible exchange rate will be introduced?’ Clients are actively buying both cash dollars and non-cash dollars into their accounts,” said sources in one of the banks.

Objective macroeconomic factors are also playing a role.

“We are at an impasse in terms of exporting and transiting our agricultural products with our Western colleagues (Poland, Hungary, Slovakia, Bulgaria). There are few logistical channels left for exports. News about individual ships leaving ports brings joy and cautious optimism, but we all understand that the transportation flow should be greater. Also, last week, the National Bank of Ukraine’s interventions in the interbank market amounted to $873 million – a record for 2023,” says financial analyst Andriy Shevchyshyn.

Another factor affecting the cash market is the increased activity of the population. After people were allowed to buy foreign currency into their current accounts up to 50,000 UAH per month with instant withdrawal in cash, they have become more active in using this opportunity to profit from the exchange rate difference.

For example, today you could buy dollars into your current account at 37.30-37.40 UAH/$ and get $1,340 for 50,000 UAH. After withdrawing them from the account and exchanging the amount at a financial company or a small bank for 38.20-38.40 UAH/$, you could get 51,200-51,500 UAH.

The maximum profit reached 1,500 UAH for every 50,000 UAH, and it could be slightly less if the bank charged a fee for cash dollar withdrawal (0.75-1% of the amount). However, this business remained profitable, especially if you had multiple accounts.

It’s worth noting that Ukrainian banks are importing record amounts of cash dollars into the country during the war.