NBU discussing possibility of conducting interventions in euros

The Oversight Council of Money and Currency Market Indicators, following the results of the semi-annual review of currency market indicators, agreed to submit for discussion to the Contact Group of the Money and Currency Markets the issues of the possibility of conducting interventions in euros by the National Bank of Ukraine (NBU) and extending the time of the National Bank's presence on the interbank currency market.

The Oversight Council's statement on the NBU website following its meeting on August 29 of this year indicates that the currency structure of transactions on the Ukrainian currency market confirms the status of the U.S. dollar as the main exchange rate-forming currency, however, in the segment of bank transactions with clients, the share of transactions in euros in the total volume tends to increase.

"In particular, in transactions for the purchase of non-cash currency by clients, the share of transactions in euros remains more than 40%," according to the document.

In addition, the Oversight Council agreed on approaches to introducing a new benchmark – the hryvnia to euro reference rate as of 12:00: "It is recommended to calculate it by multiplying the dollar reference rate and the average value of the BFIX U.S. dollar/euro quotes calculated from 10:30 to 12:00." In addition, it was deemed appropriate to change the methodology for calculating the official hryvnia exchange rate to foreign currencies (except the U.S. dollar) and the official price of bank metals, applying to the calculation approaches similar to those for calculating the hryvnia to euro reference rate as of 12:00.

"The Council members also came to a common opinion regarding the advisability of introducing new approaches to determining the list of currencies for which the official rate is set daily, with the cancellation of the list for monthly setting," the NBU said in the report on the meeting's results.

According to it, the review confirmed that the trading volume is quite sufficient to be able to calculate a reliable indicator based on the hryvnia to U.S. dollar exchange rate (reference and official rates) using the current methodology for determining the indicator as a weighted average.

"However, this activity is insufficient to consider the issue of a possible transition to calculating currency market indicators using the fixing methodology in the foreseeable future. Currently, the volume and number of transactions in any time period in which the fixing could be calculated are relatively insignificant to consider this fixing representative," the council members said.

It is indicated that the calculations and statistical data presented in the review showed that the criteria for selecting transactions in the primary sample, which is used to calculate the official and reference rates of the hryvnia to the U.S. dollar, remain relevant in the current methodology. This concerns the limitation on the volume of one transaction (from $100,000 to $5 million) and the time of its conclusion (before 12:00 for the reference rate and before 15:00 for the official hryvnia to U.S. dollar exchange rate). In particular, a decrease was noted in comparison with the pre-war period in the share of transactions in the primary sample for calculating the official and reference values ​​of the hryvnia to U.S. dollar exchange rate, discarded as outliers in accordance with the current methodology.

"Based on the results of the review of currency market indicators, it was concluded that the official/reference hryvnia to U.S. dollar exchange rate and the methodology for calculating them meet the conditions and needs of the market at the current stage of its development," the NBU said in the document.

The NBU reminds that the periodic review of foreign exchange market indicators is a special procedure aimed at assessing the presence of structural shifts in the market and/or the emergence of other grounds that may indicate the need to replace existing indicators, adjust their methodology or other important aspects related to their calculation and publication (calculation time, publication procedure, etc.).

Such a review is carried out by the Oversight Council of Money and Foreign Exchange Market Indicators. It was first conducted in February 2024, and the August review was the second.

Currently, the foreign exchange market indicators are the official hryvnia exchange rate to foreign currencies, the official price of bank metals and the reference value of the hryvnia exchange rate to the U.S. dollar.