The exchange rates of the US dollar and the euro against the Ukrainian hryvnia can move in different directions due to the situation on the global currency market, geopolitical events, and the policy of the National Bank of Ukraine. At the same time, short-term strengthening of the national currency does not mean it will continue to rise. Taras Kozak, founder and president of the UNIVER investment group, explained in a blitz interview how currency markets work, the role of the regulator, and how citizens should manage savings.
The Impact of the Forex Market and the Role of the NBU
The National Bank of Ukraine primarily controls fluctuations in the dollar-to-hryvnia exchange rate because it is of the greatest concern to the population. The regulator smooths out fluctuations in this market, whereas movements in the hryvnia-euro rate are left unmanaged. The dollar-euro market is the colossal global Forex market, where trillions of dollars and euros are traded daily, causing currencies to rise or fall unpredictably based on geopolitical statements.
According to the expert, if the dollar rises significantly against the euro globally, it will likely appreciate slightly against the hryvnia, while the euro drops against the Ukrainian currency. Such scenarios are entirely natural given the scale and dynamics of global trading rather than domestic economic shifts in Ukraine.
Long-Term Depreciation and the Economic Link to Inflation
If the hryvnia weakens against the dollar while the euro drops, it means the hryvnia is actually strengthening against the European currency. However, this situational shift does not imply long-term extraordinary strength for the hryvnia. Over a multi-year perspective, the hryvnia depreciates against major world currencies in line with macroeconomic programs designed to offset higher inflation in Ukraine.
This connection ensures value parity for goods. If domestic prices double over a certain period, the hryvnia must depreciate by roughly half against major global currencies to keep the cost of imported goods and comparable products aligned internationally.
Exchange Rate Calculation Mechanics and Risks for Citizens
The NBU focuses predominantly on the dollar, though it monitors the euro without attempting to smooth out both currencies simultaneously, which creates occasional price spikes. There are practically no direct hryvnia-to-euro trades inside Ukraine; instead, the rate is calculated by taking the hryvnia-dollar interbank rate set by the NBU and multiplying it by the international euro-to-dollar exchange rate.
Sudden spikes in the euro often trigger unwarranted public panic, leading people to buy European currency at market peaks before it drops. The expert emphasizes that analyzing short-term euro fluctuations to make far-reaching conclusions is entirely pointless since Ukraine's economy is not driving these global shifts.
Significance of Market Mechanisms for the Ukrainian Economy
Understanding these currency market principles helps citizens approach personal savings rationally and avoid emotional decisions during periods of sharp exchange rate fluctuations. Because the NBU cannot simultaneously stabilize both major currencies without causing market distortions, individuals must factor in global market trends and inevitable long-term inflationary depreciation when planning personal budgets.
