NBU has enough reserves to resist to small pressure on hryvnia by nonresidents-holders of govt bonds – expert
It is likely that nonresidents in the conditions of the unfolding global crisis would withdraw funds from Ukraine received from the payments on government domestic loan bonds held by them, although the National Bank of Ukraine (NBU) has reserves to reflect the impact of this pressure on the hryvnia, the founder and head of Concorde Capital investment company, Ihor Mazepa, has said.
"In situations of uncertainty, turbulence, and a lack of understanding of what will happen next, financial investors always react the same way: they sell securities with rating 'B' and lower (the level that Ukraine is now at), and even taking into account the fact that this rating has grown over the year," he told Interfax-Ukraine.
According to him, confirmation of this is meltdown Monday on March 9 this year, in which there is no Ukrainian context. "Both the hryvnia exchange rate, and the decline in the value of bonds, which began at the beginning of last week, and the inability of Belarus to place its eurobonds, and the default of Lebanon, and the pre-default state of Ecuador – these are all signals of the onset of the global crisis that began with the coronavirus in China," Mazepa said.
He added that great volatility today is observed in the markets of many national currencies: this applies not only to the hryvnia, but also to the Russian ruble, Turkish lira, euro and pound sterling.
"And the fact that the hryvnia fell to UAH 25.50/$1, this is most likely the result of this panic. However, there is no obvious reason for such a panic," the head of Concorde Capital said. He said that low oil prices and growing uncertainty, under which Ukrainians will consume less and save more, for Ukraine mean an improvement in the trade balance, which has every chance for many years to see a surplus.
"What can affect the hryvnia exchange rate in the distant future is the situation that foreigners are withdrawing from the assets of all emerging markets," Mazepa said. According to him, investors are even moving away from European assets: they are transferred either to gold or to American securities. "This means that investors whose securities are redeemed this year will not be transferred to new securities that the Ministry of Finance may offer. Most likely, they will take these hryvnias from repayments, go to the foreign exchange market and buy U.S. dollars. This may lead to a little pressure on the national currency," the head of Concorde Capital said.
At the same time, he said that the NBU's foreign exchange reserves at the beginning of March exceeded $26.6 billion and they are enough for 4 months of Current External Payments (CXP), while the generally accepted comfortable reserve is 3 months of CXP, or about $19-20 billion.
"This figure gives the NBU a backlash of $7 billion, which it could painlessly offer to the market. It is in case of unforeseen situations, such as a crisis, when foreigners leave emerging markets – this is the pillow that the National Bank has to support the hryvnia," Mazepa said.