September turned out to be a month of gradual weakening for the hryvnia. At the beginning of the month, the official exchange rate stood at UAH 44.52/$, while on 30 September it reached UAH 44.86/$. This means the dollar gained more than 30 kopiykas over the month. The movement was fairly gradual, although pressure on the hryvnia increased noticeably in the second half of the month.
Looking at the exchange rate dynamics throughout the month, the hryvnia remained relatively stable in early September, with the rate moving in both directions within a range of just a few kopiykas. After 20 September, however, pressure on the hryvnia intensified: from 21 to 25 September, the official dollar exchange rate rose from UAH 44.6743/$ to UAH 44.9729/$ — almost 30 kopiykas in just one week. This indicated stronger demand for foreign currency.
The main reason behind September’s movement was the imbalance between foreign currency supply and demand. The Ukrainian economy continues to have significant import needs, which means businesses require foreign currency to settle payments with overseas suppliers.
This factor may become more pronounced in autumn. Business activity picks up after the summer period, companies build up inventories for the colder season, and demand for energy resources, equipment and other imported goods increases.
The security situation remained another important factor. Damage to businesses, logistics and energy infrastructure can increase reconstruction needs and, consequently, demand for imported goods and equipment.
The National Bank of Ukraine remained a key participant in the foreign exchange market. The regulator sold foreign currency to cover the structural deficit and prevent excessive exchange rate fluctuations.
In September, the NBU sold more than $5.5 billion. This was higher than in August and indicates that demand for foreign currency remained strong. At the same time, the regulator’s sales helped contain a more rapid weakening of the hryvnia. Therefore, the NBU’s foreign currency sales in September should be viewed not as an attempt to “stop the dollar”, but as a way to make exchange rate movements more gradual. This is exactly what we saw in practice. Demand for foreign currency was high, but the hryvnia did not experience a sharp decline.
At the same time, Ukraine’s foreign exchange market was also influenced by external factors. The performance of the dollar on global markets, decisions by major central banks and expectations regarding interest rates all shape global demand for the US currency. This also matters for Ukraine due to movements in the euro against the dollar and changes in the balance of major currencies in the country’s foreign trade.
Another factor is the price and physical volume of energy imports. An increase in either raises the need for foreign currency to pay for imports. Despite strong demand for foreign currency, the hryvnia did not experience a sharp decline in September. Several stabilising factors contributed to this. First and foremost, international financial assistance remains an important source of foreign currency supply for the economy. In addition, demand for foreign currency from households and businesses changes depending on exchange rate expectations, the schedule of budget payments, import settlements and other factors. Therefore, even when the hryvnia is under general pressure, the foreign exchange market may change direction over short periods.
This is exactly what we observed in September: after a noticeable rise in the exchange rate during the final ten days of the month, the hryvnia partially recovered its position. Therefore, it is more accurate to describe the current situation not as a straight-line movement in the exchange rate, but as a gradual shift in its level under the influence of supply and demand.
Despite a number of factors that could contribute to further weakening of the hryvnia, October is unlikely to bring a sharp change in the exchange rate situation. The NBU has tools to smooth out short-term imbalances, while international financial support remains an important factor in maintaining stability in the foreign exchange market.
At the same time, short-term moves beyond the expected exchange rate range cannot be completely ruled out. The foreign exchange market reacts not only to fundamental factors but also to temporary shifts in demand, news, the security situation and the behaviour of market participants.
Therefore, the baseline scenario for October remains a gradual movement of the hryvnia under moderate pressure, without sharp exchange rate fluctuations, provided no major new external or domestic factors emerge. It is important to watch not only whether the dollar crosses a particular psychological threshold, but also how quickly it moves. September showed that even with strong demand for foreign currency, the hryvnia can weaken gradually. A sharp acceleration in the exchange rate could occur if import needs, energy prices and business demand for foreign currency rise simultaneously while external financing flows arrive more slowly. One of the key indicators for the market in October will remain the NBU’s behaviour — the volume of its foreign exchange market operations and its response to changes in the balance between supply and demand.
