Commitment to FX flexibility to be confirmed.

Commitment to FX flexibility to be confirmed.



1 жовтня 2015 года
ICU

In our view, this year's financial stabilization produced a kind of unofficial FX band supported by the authorities. The NBU executed several FX market interventions at 21-23/USD and launched FX auctions to accumulate FX reserves by buying USD 21.7 UAH). This policy is set to be short-lived as high inflation (>50% YoY) has rapidly eroded the UAH's competitiveness. Our data suggests that the UAH turns from undervalued to overvalued in 2H15. This would require Ukraine's authorities to allow more FX flexibility to prevent the hryvnia from an extended real appreciation that would create conditions negative to economic growth. This means the UAH should weaken at the end of 2015 through 2016, and then stabilize in 2017-18 when the US Fed monetary policy cycle turns from tightening to loosening.

More details are in the section "View on the UAH: An implicit peg to be abandoned cautiously" on page 31.

Источник: ICU

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