Review-forecast of hryvnia exchange rate against key currencies from analysts of KYT Group
Issue #2 - April 2025
The purpose of this review is to provide an analysis of the current situation in the Ukrainian currency market and forecast the UAH exchange rate against key currencies based on the latest data. We review current conditions, market dynamics, key influencing factors and likely scenarios.
Analyzing the current situation
As of the end of April, the Ukrainian currency market demonstrates preservation of the main trends recorded in the first half of the month: relative stability of the decline in the US dollar segment and continued strengthening of the euro against the hryvnia.
The key differences in April dynamics are the shift in the balance of supply and demand in favor of the hryvnia, lower average daily demand for foreign currency on the part of households, and smoothed market behavior amid moderate inflation and continued external support.
Key drivers:
- The dollar exchange rate is kept in a stable corridor with a moderate inclination to revaluation in favor of the hryvnia amid excess supply of cash currency and global weakening of dollar positions.
- The Euro continues to grow under the influence of global processes, trade conflicts and due to attempts of the new US administration to exert direct verbal pressure on the Fed, while in Ukraine the demand for the Euro currency continues to grow.
- The general state of the currency market is characterized by increased liquidity, low volatility in the dollar segment, but the euro segment demonstrates nervous growth with clear signs of speculative activity.
Internal factors
- The National Bank of Ukraine maintains a policy of soft flexibility, keeping the discount rate unchanged and controlling the official exchange rate. The spread between the official and market dollar rates remains minimal, while in the euro segment it is widening.
- The activity of households in the cash market declined for the third month in a row: the average daily demand fell from $41 mln in February to $17 mln in April. This indicates a decrease in panic moods, market saturation and/or exhaustion of purchasing power of the population against the background of weak economic growth. Another factor could be the cycle of spring holidays, which is a traditional period of selling off foreign currency savings to celebrate and finance short-term vacations.
- At the same time, there is still a structural tension, i.e. a twofold excess of imports over exports, which remains a factor of "washing out" foreign currency liquidity from the country. However, at current stage it can be fully compensated by international aid, which is expected to cover Ukraine's need for foreign currency.
- The National Bank claims stable control over inflation expectations. Although March inflation reaches its peak at around 15-16% annually, it is forecast to traditionally decline to 8.7% yoy in the summer months, which, combined with the summer slump in business activity, will help reduce the population's focus on currency. As a consequence, it may reduce speculative motivation of currency market operators.
External factors
- At the global level, the main source of turbulence remains the trade wars initiated by the Trump administration, which have increased the risks of de-globalization and weakening of the dollar due to its diminishing role as a reserve and settlement asset.
- This uncertainty is pushing global investors to invest or hedge through protective assets - gold, the Swiss franc, the Japanese yen and the euro, which is now able to act as a stabilizer.
- Additional pressure on the dollar was Donald Trump's open demand for the U.S. Federal Reserve to immediately reduce the discount rate, which created a risk of reducing the Fed's independence and provoked a decline in bond yields and the fall of the U.S. currency to the lowest values in six months.
Overall conclusions:
- The hryvnia remains stable despite external pressure and internal imbalances. Thanks to rhythmic financing of the budget deficit and financial assistance from foreign partners, the market is kept in balance.
- The dollar exchange rate will remain in a narrow corridor, while the euro will continue to grow, maintaining increased volatility.
- The currency cash market is in the saturation phase, and the decline in demand for currency gives grounds to speak about the relative predictability of the market.
- Speculative risks in EUR/UAH are growing - businesses should consider possible short-term drawdowns or momentum spikes when planning operations.
Overview of currency dynamics and forecast
US dollar exchange rate
The USD/Hryvnia exchange rate remains within a stable narrow corridor - from 41.10 to 41.80 UAH/$ with minimal volatility. In April, the market demonstrates synchronization of the market and official exchange rate, which reduces risks for businesses and consumers. Revaluation pressure is intensifying against the backdrop of decreasing demand from the population and increasing dollar supply.
During the second half of April, the dollar exchange rate remained in a stable corridor, without sharp fluctuations. The lowest values were observed in the range of UAH 41.10-41.35/$ on purchase, while the sale was in the range of UAH 41.57-41.85/$ during the whole period.
Our short-term dollar exchange rate forecast provided in the previous review was fully confirmed within standard market deviations. Exchange rate dynamics in the dollar segment testifies to high current predictability of the domestic market.
The peculiarity of the period was the gradual smoothing and narrowing of the spread between the bid and ask rates, which indicates the growth of currency liquidity and reduction of tension in the cash market. Other special features of the second half of April are the movement of market rates of dollar synchronously with the official rate of the NBU and with almost equal spread of buying and selling rates from it. This indicates the effectiveness of the National Bank's policy of smoothing situational fluctuations, which reduces volatility and contributes to the formation of stable expectations among market participants.
Global factors also support the stability of the dollar in Ukraine - despite the weakening of the dollar in global markets, these processes are not translated into domestic risks thanks to foreign exchange reserves and the flexibility of the NBU policy. Global processes have not created new pressure on the hryvnia, but may in the medium term become a driver of capital outflow of Ukrainians and businesses from the dollar.
Forecast for the near term:
- Short-term horizon (2-4 weeks): movement towards UAH 41.20-41.80/$ with minor deviations (± 20-30 kopecks) is most likely. Volatility is low, speculative demand is limited.
- Medium-term horizon (2-4 months): correction to UAH 42.00-42.50/$ is possible in case of intensification of imports, acceleration of inflation or weakening of external financing.
- Long-term horizon (6+ months): the baseline scenario retains the potential for a gradual shift of the exchange rate towards UAH/$44.00-45.00.
Euro exchange rate
In the second half of April, the euro to hryvnia exchange rate continued to grow, confirming the previously recorded uptrend. As we predicted in the previous review, market quotations confidently crossed the 47 UAH/euro mark, and by the end of April, the average cash euro selling rate consolidated to 48.00 UAH/euro, which allowed domestic Ukrainian euro investors to receive a rate premium of 1.6 to 2.4 UAH per euro from the beginning of the month to the end of April.
The change in the spread between buying and selling rates requires special attention. If at the beginning of the month the spread was kept within 60-70 kopecks, then already at the end of April it exceeded UAH 1 at a number of cash currency market operators, and at some operators it reached UAH 1.3-1.5. This is a marker of growing market nervousness and increased expectations of further volatility. Market operators are trying to put into the price the risks of possible further strengthening of the euro or correction on the background of speculative activity.
Another important signal is a noticeable discrepancy between market rates and the official NBU rate. The euro exchange rate, which is determined by the regulator, lags behind the market values by 30-50 kopecks on average, which is an indicator that the market reacts more quickly and flexibly to global currency trends, in particular, the strengthening of the euro against the U.S. dollar. The official dynamics is moving by inertia, while the currency market operators are already putting expectations of further changes into quotations.
This outperformance is indicative of a rising premium for owning the Euro currency, which is increasingly being used as an instrument not only for payments but also for savings and, in some cases, as an attempt to capitalize on global turbulence.
Prediction:
- In the short-term horizon (2-4 weeks), the EUR exchange rate is most likely to consolidate for purchase above UAH 48/EUR with a gravitation to UAH 48.50/EUR; currency market operators will buy it within the established spread, which will mean the rate for such operations around UAH 47.50 if the current factors of influence and drivers in the USD/EUR pair are maintained.
- In the mid-term horizon (2-4 months), the trend of EUR strengthening is expected to be maintained with a highly probable potential to reach UAH 49.50/EUR, also provided the current global context is preserved.
- Long-term outlook (6+ months) - the global financial restructuring, the shift of emphasis from the dollar to the euro and other assets, as well as the dynamic situation and contradictory information make us temporarily refrain from publishing a long-term outlook for the euro in absolute terms in the future. Although we would like to remind you once again: the euro/hryvnia pair remains one of the most sensitive and volatile, which requires constant attention from businesses and investors when planning the currency structure of their assets and operations. In addition, it is impossible to exclude a powerful speculative appetite of global and local currency market operators for operations with the euro, which may become a new unpredictable driver of the non-economic agenda.
Recommendations for businesses and investors
The continued dynamism in the markets encourages us to maintain our approach of dividing recommendations into two separate blocks:
- basic recommendations - will help to avoid exchange rate risks or minimize losses;
- updated recommendations - to help guide the revision of investment and savings strategies.
Basic recommendations that remain relevant
Diversification of the currency portfolio is a basic strategy. The euro demonstrates volatility and growth potential, while the dollar shows weakness against the background of global events. It is recommended to keep a part of assets in euro, especially if there are corresponding liabilities. The dollar is an instrument of short-term liquidity and hedge.
Maximizing liquidity is an absolute priority.
All your currencies should be readily available for operational maneuvering - this is key given global turbulence and political risks.
The hryvnia is held in functional volume.
The hryvnia remains stable, but the inflationary background and potential exchange rate risks in Q2-Q3 2025 do not allow holding a large hryvnia surplus. If possible, avoid tying up hryvnia liquidity in instruments with fixed maturities or without the possibility of yield revision.
Updated and amended recommendations
Change in the share of currencies in the portfolio: smooth migration from the dollar to the euro
It is advisable to gradually rebalance the portfolio towards the euro. It is increasingly used in calculations and potentially yields a better exchange rate premium. But turbulence in international currency markets requires constant monitoring of significant news and events, without being influenced by loud headlines and herd behavior. Only investors with nerves of steel, a cool head and a clear strategy will emerge from the currency storm with a profit or minimal losses.
Have a safety margin and insure risks
Put buffers in place for forward exchange rate fluctuations: despite the upward trend for the euro and downward trend for the dollar, within short periods, "potholes" and "slides" occur in this pair and relative to these currencies to the hryvnia, which may cause losses or unexpected expenses.
Increased attention to spreads - an indicator of market mood and trend forecasting
Euro spread growth is a signal: the market is nervous, expecting changes. At such moments it is better to avoid speculation and not to decide under the pressure of emotions. For experienced currency speculators - this is a great field and a good time for productive maneuvering, but for everyone else - risks of losses. The same applies to the dollar - reduce focus on rates and analyze spreads.
Scenario planning and regular reassessment
The market will continue to be turbulent for an indefinite period of time. Have alternative scenarios for currency behavior, especially for Q3-Q4, when entry into a new devaluation cycle is most likely.
This material has been prepared by the company's analysts and reflects their expert, analytical professional judgment. The information presented in this review is purely informational and cannot be regarded as a recommendation for action.
The Company and its analysts make no representations and accept no responsibility for any consequences arising from the use of this information. All information is provided as is, without any further warranty of completeness, obligation of timeliness or updates or supplements.
Users of this material should make their own risk assessments and conscious decisions based on their own evaluation and analysis of the situation from various available sources that they themselves consider sufficiently qualified. We recommend that you consult with an independent financial advisor before making any investment decisions.
BACKGROUND
KYT Group is an international multi-service FinTech product company that has been successfully operating in the non-banking financial services market for 16 years. One of the flagship activities of the company is currency exchange. KYT Group is one of the largest operators of this segment of the financial market of Ukraine, is included in the list of the largest taxpayers, is one of the industry leaders in terms of asset growth dynamics and equity.
More than 90 branches in 16 largest cities of Ukraine are located in convenient locations for customers and have modern equipment for convenience, security and confidentiality of each transaction.
The company's operations comply with the regulatory requirements of the NBU. KYT Group adheres to EU operating standards, with branches also in Poland and plans for cross-border expansion into European countries.