Dollar and euro: what matters for October's hryvnia

Ukraine's currency market enters October with oil prices, developments in the Middle East and decisions by the US Federal Reserve and European Central Bank among the main external influences. Finance.ua also identifies inflation, Ukraine's budget position and international assistance as key factors. Its outlook anticipates continued depreciation pressure on the hryvnia, while assessing that the National Bank of Ukraine will have sufficient resources to support the exchange rate.

As of September 30, this is an outlook for the coming month, rather than a report of an October currency move. Its central point is the balance between pressure on the hryvnia and the NBU's capacity to counter it. Dollar and euro pricing will depend on both domestic financing conditions and developments abroad.

Context

The Middle East matters for currencies through energy markets and investors' appetite for risk. Higher oil prices can increase the cost of imported energy, creating an additional need for foreign currency to pay suppliers. Geopolitical developments can also change demand for dollar assets independently of conditions in Ukraine. These are separate channels through which international news can reach the local market.

Federal Reserve and ECB decisions influence the relative appeal of dollar and euro assets through interest rates and expectations for future policy. The euro's price in hryvnias therefore reflects more than Ukraine's domestic currency balance: the euro-dollar exchange rate matters too. Even when the dollar is relatively steady against the hryvnia, the euro can move differently because of changes on international markets.

Inflation connects several of these factors. Rising energy costs can feed into prices for goods and services, while persistent inflation influences central banks' policy choices. For currency markets, the significance of an inflation release includes how it changes expectations for interest rates. The same broad development in prices can have different implications for the dollar and euro depending on the economic conditions facing each central bank.

Within Ukraine, the budget and international assistance are central to the outlook. External financing helps cover public funding needs and supports currency stability. The timing of inflows matters alongside their overall size, because government spending and payments require financing throughout the month. News about assistance is therefore most useful when considered together with the state of public finances.

Finance.ua's assessment of the NBU's resources provides the counterweight to its warning about depreciation pressure. Pressure does not necessarily translate fully into daily exchange-rate changes: foreign-exchange interventions can help smooth imbalances between supply and demand. Supporting the market, however, is not the same as keeping every quotation unchanged.

For Kyiv's cash market, these factors matter through the hryvnia exchange rate, but a monthly outlook is not a transaction quote. Check current AEX rates before exchanging, distinguishing the buying and selling rates for the relevant currency. The outlook's main message is continued pressure, balanced by the NBU's ability to support the market.

Based on reporting from Finance.ua.