Overview and forecast of hryvnia exchange rate against key currencies from KYT Group analysts

Issue No. 1 - August 2025

The purpose of this review is to provide an analysis of the current situation on the Ukrainian currency market and a forecast of the hryvnia exchange rate against key currencies based on the latest data. We analyze current conditions, market dynamics, key influencing factors, and likely scenarios.

Analysis of the current situation on the Ukrainian currency market

The first decade of August and the beginning of the second were marked by a number of data and decisions that set the tone for the exchange rate in the coming weeks. As before, external factors dominate, while internal factors mostly generate situational impulses and slight volatility without changing the long-term trend.

International context

UNITED STATES. July inflation slowed to within expectations, with prices rising by 2.7% yoy and core inflation (excluding food and fuel) by 3.1%, fueling expectations of a Fed rate cut in September and giving the dollar a brief respite after strong macro statistics in previous periods. The labor market has also cooled: nonfarm payrolls were weaker and unemployment rose, further increasing the likelihood of a dovish scenario for the Fed. Taken together, these factors reduce the so-called USD tightening premium over the next few weeks, at least until the Fed makes clear signals about its future policy.

Eurozone. The flash estimate of the Harmonized Index of Consumer Prices (HICP) published by Eurostat for July was 2.0% y/y (stable), which preserves the ECB's argument for gradual cautious easing later this year. The final GDP estimates for the two quarters confirmed weak but still positive growth. For the euro's future trajectory, this is more of a neutral or moderately negative signal in isolation from other drivers, as there was no hawkish surprise.

The UK sent its own signal to the global currency tone - its central bank cut its policy rate by 25 bp to 4.0%, signaling the start of monetary policy rebalancing by other major economies outside the US and the euro area and creating expectations for a broader rate review, provided that other macro indicators confirm this policy. In general, such processes soften the dollar's advantage in the basket of global currencies over the next 1-2 months, if the Fed moves in the same direction.

The global energy factor has not yet provided any impetus for key economies to revise their policies. Market expectations for oil prices have not changed dramatically, and current quotes fully reflect the news background of recent weeks: the supply/demand balance does not add to inflationary tensions in the EU, so it is not a factor that would force the ECB to tighten its policy. This will also work against further euro appreciation. The expected trajectory is for a neutral to moderately downward impact on the euro, provided there are no other signals or data that could restrain or reverse the current trend.

Thus, given the current international backdrop, the USD has fewer reasons and drivers to strengthen in the short term, while the EUR is more likely to experience a sideways move.

The key factors in the near term will be the September Fed rate decision and further actions by the central banks of the world's major economies: the expected convergence of rates in the leading economies reduces the US yield advantage, which means that the dollar's advantage is melting away, but the euro is not getting its new driver either.

Domestic Ukrainian context

Reserves and interventions. The National Bank of Ukraine's international reserves remain high, despite the NBU's significant foreign currency sales and debt repayments. Despite the decline, the reserve cushion remains sufficient to smooth out fluctuations and maintain a controlled exchange rate dynamic.

Inflation. In July, inflation slowed to 14.1% year-on-year (yoy), and for the first time in two years, deflation was recorded at -0.2% on a monthly basis. This reduces short-term price risks and inflationary premiums in the pricing of importers/retailers. For the hryvnia exchange rate, these factors are neutral or moderately calming, as they eliminate the arguments for a sharp “insurance” demand for the currency.

External support is coming in as expected, which supports the basic set of factors for a stable hryvnia scenario. The EU Council's decision to disburse another fourth tranche of more than €3.2 billion under the Ukraine Facility is an important reinforcement of fiscal stability and FX liquidity for the fall months. This indirectly reduces the risks of hryvnia volatility in the foreign exchange market.

A new step in currency liberalization by the NBU is a positive signal of stable expectations of the market and the regulator. In early August, the NBU allowed the repatriation of dividends and expanded hedging instruments, as well as simplified a number of technical FX transactions. Structurally, this reduces market risks and improves predictability for businesses without a sharp additional demand for foreign currency, which also removes pressure on the exchange rate.

The Ukrainian market is entering the second half of August with a preserved exchange rate consensus: reserves are sufficient, external financing is confirmed, inflation has cooled, and liberalization is dosed and managed. Domestic factors will continue to give short bursts, but the overall direction will still be determined outside Ukraine - by international data and decisions, primarily those of the US and the EU.

US dollar exchange rate: dynamics and analysis

General characteristics of market behavior - calm and narrow corridor

• Quotes on the market are moving in a narrow range: buy - 41.20-41.35 UAH/$, sell - 41.65-41.80 UAH/$, official - about 41.50-41.60 UAH/$. After the local low on August 11, there was a slight rebound, but no change in the trend. This confirms our expectations and estimates of no significant volatility, with only minor situational movements.
• The broader trend observed over the past 30 days is a gradual decline in all indicators: sell - from ~42.05 to 41.70 UAH/$, buy - from 41.56 to 41.23 UAH/$.
• The market spread is consistently small, ranging from UAH 0.40-0.50, and market rates are usually equidistant from the official rate. The combination of these factors is a signal of low risk premiums in the market and the preservation of exchange rate consensus on the current and expected situation between the NBU, FX market operators, and economic entities.

In general, the Ukrainian FX market is in a calm phase: international factors do not provide drivers for sharp changes, while the NBU's measured interventions and liberalization keep market volatility and manageability low. Domestic demand is not driven by hype or accumulative drivers, importers act as planned without provoking abnormal surges, and market operators' “insurance” margins are smaller or practically absent in the UAH/USD quotes.

Forecast.

• In the short term (1-3 weeks): the basic range is 41.30-41.85 UAH/USD. A breakout below 41.20 is unlikely without a strong external catalyst; short-term impulses are possible on US data or news about external financing for Ukraine.
• Medium-term (2-3 months): 41.50-42.20 UAH/$. Expectations of a September Fed decision with a likely (but far from guaranteed) rate cut are pushing quotes to the lower end of the band; autumn budget payments/energy imports may push quotes up, but the start of the export season and its success is a strong stabilizing factor. If the scenario of rising uncertainty (security, economic indicators, political shifts) or deteriorating external revenues materializes, short-term gains to 42.30-42.40 are likely.
• Longer-term (6+ months): the scenario of a smooth, controlled devaluation to UAH 43.00-44.50 remains, subject to stable external support and the NBU's current intervention tactics; restraints are new tranches of partners and moderate inflation, risks are geopolitics/security and fiscal needs.

Euro exchange rate: dynamics and analysis

General characteristics of market behavior - reflection of the euro to hryvnia exchange rate on external factors

After a long, smooth slide in the buy range of 47.85 to 47.75 and sell range of 48.65 to 48.45, the exchange rate rebounded sharply on 13-14 October: buy range of 47.90 to 48.20 and sell range of 48.50 to 48.85. The official NBU exchange rate rose by a one-day jump from 48.0758 to 48.6472, up UAH 0.58.

A steady downward trend was observed for thirty days, which was interrupted by a corrective recovery on August 13-14.

For most of the period, market rates were equidistant from the official one (the classic corridor), and the bid/ask spread remained at ~0.50-0.70 UAH/€, a sign of stable expectations and lack of nervousness.

The recorded rebound was the result of an external impulse (movement in the EUR/USD pair on the global market after the US statistics) and was quickly reflected in the EUR/UAH market quotes.

Such episodes do not indicate an imbalance, but only the expected technical alignment between the external and internal markets without changing the overall trend - data from the US and eurozone statistics allowed the EUR to make a technical rebound, but the market has already played off this momentum, so without new significant data from the US or the EU, we should not expect further growth in the euro against the hryvnia.

Domestic demand will also not be able to drive the growth of quotations due to the speculative component of setting rates by market participants - after the overheating of June and July and the exhaustion of effective demand, interest in cash euros has cooled. Importers are acting in a planned manner, which smooths out the overall pressure on the market and helps to normalize spreads.

Forecast.

• In the short term (1-3 weeks): the basic range is 48.20-48.90 UAH/€. Situational movements are possible under the influence of new data from the US and the EU; in the event of further dollar weakness, the market may test 48.90-49.10 UAH/€.
• Medium-term (2-3 months): 48.60-49.80 UAH/€. If the Fed goes for a rate hike and the EU remains calm, the upper part of the band will be the upper part of the band; in the scenario of a strong USD or weak euro statistics for the eurozone, the exchange rate will stay at the lower end of the band - 48.20-48.60 UAH/€.

• Long-term (6+ months): 49.00-51.00 UAH/€ with periodic waves of volatility depending on US-EU trade policy and the ECB and Fed's rate actions.

Recommendations: act in ranges, keep liquidity, hedge risks

Key universal ideas:

- On the short term: USD has fewer reasons to strengthen, EUR is more likely to be sideways with technical bounces.

- Liquidity over profitability: keep a stock of free currency for current needs, term instruments only with the option of early access with minimal losses.

- A universal strategy for everyone - flexibility, trenching, hedging.

- Plan in ranges, not points: include exchange rate corridors in your calculations and forecasts, not fixed numbers.

- Keep an eye on spreads: this is now a more important indicator than the exchange rate. Narrowing is the moment to optimize purchases/sales, while widening is a signal to slow down.

- Risk management: Avoid large transactions and fixed commitments, avoid decisions based on emotions after news/social media - in the context of exchange rate calm, the media are trying to “squeeze clickbait out of nothing.”

For private investors and savers:

• USD is the basis of stability, EUR is the flexibility: the dollar is the “anchor” of the portfolio; after correction, add euros gradually in small amounts.
• Don't chase the “peaks”: the current market is a sideways one, so distribute exchanges systematically over time without trying to catch the perfect rate.
• Hryvnia should be used exclusively for expenses: only an operational reserve for 1-2 months of needs or current expenses, and the surplus should be invested in hard currencies or currency-linked instruments.

For speculative operations on USD/UAH & EUR/UAH:

- It's time for short positions and quick action: record profits regularly in “small portions” and cut losses quickly.

- Watch out for “intersections” between the official and the market: a sudden jump in the official rate and narrowing spreads usually mean a technical lag and a quick “catching up” of the market - an opportunity for short positions / profit taking.

- Take care of liquidity: refrain from transactions or make smaller trades in an illiquid market (narrow choice of profitable offers, wide spreads), do not hold large positions before the release of important news.

This material was prepared by the company's analysts and reflects their expert, analytical professional judgment. The information presented in this review is for informational purposes only and cannot be considered a recommendation for action.

The Company and its analysts make no representations and assume no liability for any consequences arising from the use of this information. All information is provided “as is” without any additional guarantees of completeness, obligations of timeliness or updates or additions.

Users of this material should make their own risk assessments and informed decisions based on their own assessment and analysis of the situation from various available sources that they consider to be sufficiently qualified. We recommend that you consult an independent financial advisor before making any investment decisions.

REFERENCE

KYT Group is an international multi-service product FinTech platform that has been successfully operating in the non-banking financial services market for 16 years. One of the company's flagship activities is currency exchange. KYT Group is one of the largest operators in this segment of the financial market of Ukraine, is included in the list of the largest taxpayers, and is one of the industry leaders in terms of asset growth and equity.

More than 90 branches in 16 major cities of Ukraine are located in convenient locations for customers and have modern equipment for the convenience, security and confidentiality of each transaction.

The company's activities comply with the regulatory requirements of the NBU. KYT Group adheres to the EU standards, having a branch in Poland and planning cross-border expansion to European countries.