Issue No. 2 – May 2026
Analysis of the current situation on the foreign exchange market of Ukraine
During May, the hryvnia exchange rate slowly moved along the trajectory of devaluation, but the hryvnia lost so gradually that in fact a relatively stable balance was formed on the market. The demand did not grow noticeably, and on the interbank market, the NBU, as before, acts as a key market maker, offering the currency through interventions.
Despite the absence of panic and hyped demand for the currency, the hryvnia is breaking new records – the exchange rate crossed the threshold of UAH 44.2/dollar. There are signs that we shouldn't count on a rollback in the near future. In order to cover the needs of the state budget, the government needs to transfer the financial assistance and loan tranches received from partners and donors from euros and dollars into hryvnia, which automatically contributes to the weakening of the hryvnia. The strengthening of the dollar on the global market also played against the hryvnia: investors are looking for opportunities to invest in dollar-denominated assets, in particular US Treasury bonds, which strengthens confidence in the American currency, whose exchange rate is strengthening despite negative foreign policy events related to the lack of a peace agreement between Washington and Tehran. The further exchange rate trajectory of the hryvnia depends on the level of demand for the currency within the country, the state of the international reserves of the NBU, the need of the Ministry of Finance for new volumes of OVDP issues and on the exchange rate fluctuations of the dollar against the euro on the global market, as well as on the dynamics of oil prices in the world.
Global context
The Federal Reserve System, at its meeting in April, it was decided not to change the key rate, currently before the dilemma of curbing the inflationary jump. Lowering U.S. inflation remains a top priority as inflation remains above the Federal Reserve's 2 percent target, Minneapolis Fed President Neil Kashkari said. However, he emphasized that the US central bank will continue to take a "balanced approach" to its dual mandate of price stability and full employment. In fact, this means a possible decision by the Fed to raise rates already at the meeting of the Fed Committee in June.
The main factor affecting the US economy remains the war in Iran. The parties never reached real negotiations. At the end of May, the USA struck Iran again. In response, Iran attacked the American air base in Kuwait. US President Donald Trump said that the country could strike Oman because of its attempts to establish control over the Strait of Hormuz together with Iran. Trump demands full freedom of navigation through the strait and threatens a large-scale attack on Oman.
Geopolitical tensions in the Middle East are reflected in fluctuations in oil prices. At the end of May, the price of Brent crude oil increased by more than 2% to about $95 per barrel, and the cost of WTI oil also increased by more than 2% to $91 per barrel. The rise in prices came after the US launched new attacks on Iran, targeting a military facility in Bandar Abbas, a strategically important port city.
Meanwhile, the US dollar is solidly strengthening against the euro in May. If at the beginning of the month the dollar traded at $1.1779/euro, then at the end of May – $1.1636/euro. As of the end of May, the DXY index shows a 0.72% increase in the US dollar over the past month. The dollar is supported by interest rates on US Treasury bonds, which are still quite high, as well as investors' hopes for a resolution of the conflict in the Middle East.
Internal Ukrainian context
In May, the Ukrainian foreign exchange market saw a moderate reduction in demand for foreign currency. The average weekly sale of currency at the interbank in April was 817 million dollars, and the average weekly sale during the first three weeks of May was 745 million dollars. During April, the NBU sold 4.08 billion dollars in the form of interventions, in the three weeks of May - 2.23 billion dollars. Since the beginning of May, the hryvnia exchange rate has been steadily moving towards devaluation, however, if in the first half of May the exchange rate stabilized at UAH 43.96 per dollar, then in the last ten days of the month the exchange rate began to decline, and as of May 29, the official rate of the NBU was UAH 44.26 per dollar. The cash market in Ukraine in May was also under the influence of the weakening of demand, official data on the volume of sales and purchases and balances on the cash market should appear in early June, but there should not be any surprises beforehand, it is probably about the tendency to increase the sale of the currency, not the purchase.
During May, the hryvnia was supported by positive sentiments regarding future inflows of funds from partners, and the decrease in oil prices also had an impact quotations on the international market. The European Commission recently announced that the EU plans to transfer 9.1 billion euros of financial aid to Ukraine in June. Thus, EUR 5.9 billion will be directed to Ukraine's defense needs, and EUR 3.2 billion to budget support. This is the first tranche within the credit program from the European Union with a total volume of 90 billion euros. In June, another inflow of funds is planned - 2.8 billion euros under the Ukraine Facility mechanism. But there are still doubts about the credit program with the IMF and the receipt of funds from the fund in June.
On May 27, the mission of the International Monetary Fund began its work in Kyiv. It should assess Ukraine's fulfillment of the requirements for the allocation of the next tranche. Earlier it was reported that the main point in the agreement of the beacons of the program is the tax policy, in particular the taxation of electronic platforms. Tax bill No. 12360 was submitted to the parliament and even came to a vote. However, on May 26, the Verkhovna Rada did not support key amendments to the draft law, which provided for the cancellation of tax benefits for international parcels up to 150 euros. The non-fulfillment of a key tax beacon of the program calls into question Ukraine's quick receipt of tranches from the IMF.
The exchange rate of the US dollar: dynamics and analysis
Controlled devaluation on the domestic currency market in May took place smoothly and without surprises. The official exchange rate at the beginning of the month was UAH 43.96/dollar, and on May 29 – UAH 44.26/dollar. On the interbank market, the exchange rate at the beginning of May was at UAH 43.9–43.95 per dollar, and at the end of the month, the interbank exchange rate shifted to UAH 44.28–44.31/dollar. The National Bank remains the main seller of currency, which it sells through currency interventions, there was no panic demand in May.
The cash market in May was also without excitement, citizens calmly buy and sell dollars and euros in exchange offices and banks, there is no shortage of currency. As of the beginning of May, the buying rate of cash dollars was UAH 43.55–43.8/dollar, and the selling rate was UAH 44.10–44.25/dollar. At the end of the month, the buying rate is UAH 43.95–44.15 per dollar, and the selling rate is UAH 44.35–44.6 per dollar. Spreads at the end of May increased to UAH 0.5-0.7/dollar.
Key influencing factors:
· Slow exchange rate fluctuations and calm demand for foreign currency in May. The hryvnia is devaluing, but there is no hyped demand, the NBU satisfies requests from importers.
· The cash market is without a shortage of currency. There is a sufficient amount of dollars in exchange offices and banks, and the population shows a restrained demand for the currency.
· International factors: another escalation in the Middle East affects investment plans, but the latest trends indicate an increase in confidence in the dollar and assets in the American currency, and the dollar is confidently strengthening on the international market.
· Behavioral expectations of the market: if in the international market all attention is focused on the new head of the Fed and the June meeting of the Fed Committee, where the level of key rates will be considered, then in Ukraine, most hopes are placed on the absence of significant damage to the infrastructure in the near future, which will reduce the need for foreign currency for the purpose of importing equipment. The exchange rate is also affected by the situation with the receipt of financial aid and the state of international reserves. Forecast Short-term (1–2 weeks): basic range of UAH 44.20–44.45/dollar, there is also a possibility of a situational strengthening of the hryvnia, but in the future a devaluation trend will return.
Medium-term (2–3 months): UAH 44.20–44.90/$. While the conflict in the Middle East is not resolved, and the oil market is in a state of complete dependence on messages from the White House, the dollar in the international market will be in a state of uncertainty and constant fluctuations both in the direction of strengthening and in the direction of losing positions. After the conclusion of the US peace agreement with Iran, the American currency may strengthen its position.
Long-term (6+ months): in the base scenario, the devaluation trend remains dominant, and the exchange rate may reach the level of UAH 44.95-45.85/$. The most important influencing factor will remain the war in Ukraine and Ukraine's need to close the state budget deficit and replenish international reserves with the help of revenues from the European Union and other donors. Until autumn, there is still a possibility of a smooth devaluation without sharp jerks, but after September the situation may change dramatically. The National Bank will remain the main currency seller on the market.
Euro exchange rate: dynamics and analysis
The euro during May moved in a paradigm of weakening against the dollar, and this trend was fully reflected in the Ukrainian currency market. If May began with an indicator of UAH 51.46/euro, then at the end of May the exchange rate reached UAH 51.43/euro.
The cash market has not changed significantly despite the gradual strengthening of the hryvnia against the euro. If at the beginning of May the buying rate was at the level of 50.95–51.4 UAH/euro, and the selling rate was within the range of 51.75–52.10 UAH/euro, then at the end of May the buying rate was at 50.85–51.3 UAH/euro, and the selling rate was at 51.75–51.90 UAH/euro. As for the spreads, they are 0.4–0.6 UAH/euro for most participants, only for some the spreads have increased to 0.9–1 UAH/euro.
Key influencing factors:
· On the international market, the trend of a strong euro was replaced by the strengthening of the dollar. In May, the dollar strengthened its position thanks to investor optimism and attractive US government bond rates, but the war in Iran still affects the exchange rate trajectories of major currencies.
· Inflation is rising in the EU, but the ECB waits and does not change rates. It is expected that the ECB may raise interest rates in June, even if the war in the Middle East ends. Experts are convinced that the EU central bank will increase the cost of borrowing by 0.25 cents. p. due to the increase in energy prices, which significantly increases inflation in Europe.
· The demand for euros in Ukraine has stabilized. The cash market is under the influence of the supply of currency from the population, there is no shortage of cash euros.
Forecast:
· Short-term (2–4 weeks): on the Ukrainian market, the euro currency may remain in the corridor of UAH 51.45–51.85/€.
· Medium-term (2–4 months): if The ECB will raise rates, the euro exchange rate on the international market has a chance of strengthening, in Ukraine there may be fluctuations in the range of 51.80-52.50 UAH/€.
· Long-term (6+ months): the euro exchange rate may be within the range of 52.20–53.80 UAH/€. The main influencing factors are the war in the Middle East, quotations on the oil market, the level of inflation in the Eurozone and the ECB's decision on key rates.
Recommendations for business and investors
The dollar is confidently strengthening on the international market. Confidence in the US currency is growing despite continued escalation in the Middle East. Strengthening the position of the dollar means a possible acceleration of the devaluation trend of the hryvnia.
The war in Iran is one of the factors affecting the exchange rate, but it is no longer the key one. Negotiations between the US and Iran have still not reached the finish line, but investors are once again actively buying US Treasuries. This gives a signal to continue investing in dollar assets, and in Ukraine - to buy dollars as a reliable currency for the formation of savings.
The Fed is preparing to change key rates. Possible rate changes already in June can briefly shake the trend of a strong dollar in the global market, but if the portfolio contains several liquid currencies, this allows you to minimize risks.
The dominant position of the American currency in the global market leaves no doubt: investments in the dollar are a reliable source of profit. Despite accelerating inflation, the US economy is growing, and the dollar remains a liquid currency, so investors should keep at least 50% in dollars.
Safe investments are a guarantee of capital preservation. In all financial scenarios, investors should anticipate stable sources of income, as well as make sure of the reliability of the placement of their assets.
Geopolitical tension as a factor influencing investment plans. Entering a successful negotiation track between Washington and Tehran will mean further positive prospects for the exchange rate trajectory of the dollar.
Oil prices are an important marker of changes in the foreign exchange market. Rising oil prices may increase the EU's dependence on the high cost of energy, which will weaken the position of the euro, and instead strengthen the position of the dollar.
The focus is on liquid currencies. Despite geopolitical risks and inflationary surges in both the EU and the US, the dollar and euro remain fundamental for investors and should be represented in both short-term and long-term currency strategies.
Diversification is a guarantee of safe investments. Investors should form currency portfolios in different currencies, and although the dollar and euro remain the basic ones, you can periodically enter other reliable European currencies – British pounds and Swiss francs.
Hryvnia – for short-distance play. The national currency moves along a devaluation trajectory, therefore, it is best to form long-term savings in foreign currencies, and keep the hryvnia exactly in the amount needed for quick investments in the national currency.
What is important in the field of news. It is necessary to follow everything related to the war in Iran, as well as the trajectory of oil prices. In June, the news from the USA regarding the key rate of the Fed, as well as the decision of the ECB regarding the base rate, will be mandatory for monitoring. In Ukraine, the main indicators of the situation on the foreign exchange market will be the situation at the front, information on the state of the energy sector, news from the IMF and messages on the receipt of new tranches of loans and international financial assistance.
This material was prepared by analysts of the international multi-service product FinTech platform KIT Group and reflects their expert, analytical professional judgment. The information presented in this overview is for informational purposes only and cannot be considered as a recommendation for action.
The company and its analysts do not make any assurances and are not responsible for any consequences arising from the use of this information. All information is provided as is, without any additional warranties of completeness, timeliness, or updates or additions.
Users of this material must make their own risk assessments and make informed decisions based on their own assessment and analysis of the situation from various available sources that they themselves consider sufficiently qualified. Before making any investment decisions, we recommend consulting with an independent financial advisor.
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