The dollar exchange rate has risen significantly in Ukraine. Experts explained the increased demand for the U.S. currency

Morning interbank trading in Ukraine on the Bloomberg platform opened with a sharp increase in demand for the U.S. dollar and a corresponding rise in the exchange rate.

After closing yesterday’s non-cash trading at ₴41.8402 per dollar, today — October 23 — trading opened at ₴41.8110 per dollar. Within the first 20 minutes, market participants purchased $84.5 million. For comparison, the entire trading volume yesterday amounted to only $198.6 million for the whole day. The exchange rate then jumped to ₴41.8950 per dollar.

Treasury officials noted that the National Bank of Ukraine (NBU) is no longer restraining the rise of the dollar and has stopped trying to hold down the exchange rate, as it had done previously.

Experts explain the increased demand for the U.S. currency by several factors — the latest shelling of Ukraine, purchases of energy equipment and fuel, and other related needs, as well as expectations that the NBU will cut the key interest rate today by 0.5 percentage points, bringing it down to 15% per annum.

The NBU’s inaction in curbing the hryvnia’s depreciation may also be linked to strong recommendations from the IMFto allow a controlled devaluation. According to the Fund, a weaker hryvnia would help improve Ukraine’s fiscal position by increasing budget revenues denominated in the national currency.