July 2026 did not bring any sharp shocks to the foreign exchange market, but it confirmed a steady trend of gradual weakening of the hryvnia. Demand for foreign currency remained high, but thanks to the actions of the National Bank, depreciation was gradual and remained under control.
The lowest official US dollar exchange rate in July was recorded on 9 July at UAH 44.47 per USD. After that, the hryvnia began to gradually weaken. By the middle of the month, the official exchange rate had exceeded UAH 44.8 per dollar, and on 29 July it reached the monthly high of around UAH 44.92. On the last day of the month, the hryvnia partially recovered its losses, with the NBU setting the exchange rate at UAH 44.69 per dollar.
A similar trend was observed in the cash market. At the beginning of July, banks were selling US dollars at an average rate of UAH 44.7–44.8 per USD, while towards the end of the month the selling rate approached UAH 44.9. The interbank market also gradually moved upwards, ending July at around UAH 44.7 per dollar.
Despite the depreciation, exchange rate movements remained under control. One of the key factors was the active involvement of the National Bank, which almost every day compensated for the foreign currency deficit in the interbank market, preventing sharp exchange rate movements.
The weakening of the hryvnia in July was the result of several factors acting simultaneously. First of all, demand for foreign currency from importers traditionally increased. In the second half of summer, Ukrainian businesses tend to purchase more fuel, energy resources, equipment and components, increasing demand for foreign currency. In addition, significant government spending, primarily on defence and social programmes, supported domestic demand, part of which was also converted into foreign currency.
Inflation expectations created additional pressure. Businesses factored higher logistics, labour and energy costs into their prices, while households continued to view foreign currency as a tool for preserving their savings. The combination of high government spending, active imports and sustained domestic demand was the main reason for the gradual weakening of the hryvnia.
At the same time, the situation could have been considerably more difficult without external financing. On 21 July, the IMF Executive Board completed its review of Ukraine’s programme and approved a further USD 690 million in assistance. At the end of the month, Ukraine received another significant source of financial support — EUR 3.47 billion from the European Union under the Ukraine Support Loan programme.
These funds do not go directly into the foreign exchange market. However, they strengthen the country’s international reserves, reduce risks to public finances and allow the National Bank to sell foreign currency more actively. This is why, despite relatively high demand for foreign currency, the hryvnia depreciated gradually rather than experiencing sharp fluctuations.
In terms of foreign currency sales in July, the National Bank sold more than USD 4 billion from its international reserves, making it one of the largest monthly volumes of foreign currency sales this year.
In effect, throughout July, the National Bank acted as the main supplier of foreign currency to the interbank market. During the final three weeks of the month alone, foreign currency sales exceeded USD 3.2 billion, while in the final week of July the regulator sold USD 1.138 billion — the highest weekly figure seen in recent weeks. This indicates that demand for foreign currency remained strong, but the NBU had sufficient international reserves to compensate for the shortage without causing sharp exchange rate movements.
Importantly, even such a significant volume of foreign currency sales did not result in a rapid decline in international reserves. On the contrary, thanks to funds received from international partners, reserves remained at a high level, allowing the National Bank to continue its managed-flexibility exchange rate policy.
One of the key events on the last day of July was the National Bank’s decision to raise the key policy rate from 15% to 15.5%. The regulator explained the move as necessary to contain underlying inflationary pressure, maintain the attractiveness of hryvnia-denominated instruments and preserve stability in the foreign exchange market.
Under the classic economic model, raising the key policy rate has several consequences. First, banks are incentivised to increase the returns offered on hryvnia deposits, making savings in the national currency more attractive. Second, borrowing becomes more expensive, which gradually cools consumer demand and reduces inflationary pressure. Third, higher returns on hryvnia assets can partially reduce demand for foreign currency.
However, in Ukraine, this mechanism does not work to its full extent. Due to the war, the significant role of government spending and administrative factors, inflation is largely driven by structural factors. Therefore, even a rate increase cannot quickly change the situation in the foreign exchange market. The effect of such a decision usually becomes apparent with a delay of several months.
That is why the US dollar exchange rate did not change significantly by the end of July. The rate increase was more of a signal to the market that the NBU is prepared to take stronger measures to combat inflation and support the stability of the hryvnia in the future, rather than an instrument for immediately strengthening the national currency.
The key factors determining exchange rate dynamics in August will remain the volume of international financial assistance, the scale of foreign currency sales by the National Bank, seasonal demand from importers and the state of public finances. If external financing continues to arrive as scheduled and the NBU continues to actively smooth market imbalances, significant exchange rate fluctuations are unlikely.
At the same time, the main risks include potential delays in international assistance, new security challenges, further growth in energy imports and increasing inflationary pressure. Under such circumstances, the US dollar exchange rate could temporarily rise above the psychological threshold, although given the country’s substantial international reserves and the NBU’s active policy, there are currently no signs of conditions for uncontrolled depreciation.
