Issue No. 1 for November 2024

The global currency market was shaken by the victory of Donald Trump in the US presidential election, which formed a wave of expectations and uncertainty.

The real balance of power will become clearer only after the first practical steps of the new administration, which will indicate the key vectors of the US economy development, determine its global influence on allied countries and blocs, as well as show the policy of influence on the US global competitors outside the Western world.

So far, there are no fundamental economic reasons for significant rate corrections, and what we observe in the global context in the markets of currencies and crypto-assets is more like “fuss on deck waiting for the weather to change”, although there is no clear forecast or signs of change at the moment, everything is based on more or less probable assumptions, expectations and faith.

Now is not the best time to form medium-term currency strategies. Although, having developed speculative skills and a taste for risk, it is possible to get income from speculation during the period of high uncertainty in the currency markets.

Meanwhile, Ukraine is experiencing record demand for currency, which is also more dictated by global processes and far from optimistic expectations of the population and businesses. The real need for currency can be and is growing only in the shadow sector, where part of business operations is moving in the conditions of economic and tax uncertainty, infrastructural and economic risks. At the same time, real currency needs for import-oriented sectors are within the normal range.

Consequently, the currency market of Ukraine remains under the pressure of psychological factors, although the fundamental macroeconomic indicators do not give grounds for the formation of strong devaluation pressure and abrupt changes in exchange rates. We can only say for sure that we will witness further smooth devaluation of the hryvnia, at least in the current security and economic environment.

The combination of these factors is pushing citizens to transfer their savings into currency instruments, and the attention of many is focused on the cryptorally.

Dollar Forecast

As we predicted earlier, the US dollar exchange rate in November remains relatively stable with minor fluctuations. The average buying rate fluctuated between UAH 41.20 and UAH 41. 35/$, while the selling rate was between UAH 41.65 and UAH 41.75/$. The official NBU exchange rate held at UAH 41.20-41.35/$ amid the absence of significant interventions by the regulator.

The spread between the bid and ask rates remains stable at UAH/$ 0.40-0.50, reflecting the shaky economic equilibrium and the balance between supply and demand.

Forecast:

- Short-term: we expect the UAH/USD exchange rate to remain stable in the range of UAH 41-42/$ through the end of the month if current macroeconomic, infrastructure and security conditions persist.

- Medium-term: gradual weakening of the hryvnia to UAH 43/$ by the end of 2024 is possible - the driver of the dollar exchange rate growth may be seasonal demand for the currency, if by that time the effective demand of households and businesses for it is not exhausted.

- Long-term: the average annual rate of UAH 45/$ in the budget forecast for 2025 assumes fluctuations in the range of UAH 44-46/$ and still looks realistic.

Euro exchange rate forecast

As predicted, the Euro continues to show a steady downward trend after peaking at UAH 46.18-45.6/€ in October. In the second decade of November, the average EUR buying and selling rate corrected from UAH 45.25-44.67/€ to UAH 44.65-44.1/€.

A relatively flat downward spread between buying and selling of EUR in the range of UAH 0.55-0.65/€ remains, which indicates the desire of currency market operators to keep an additional premium on the increased demand for Euro currency, while its redemption from households and businesses is closer to the official NBU rate, which indicates the unwillingness of currency market operators to take the currency risk in case of a reverse “rebound” of the EUR exchange rate, which may be associated with the receipt of new signals from key players in the global economic system.

Forecast:

- Short-term: we see the continuation of the downtrend until the end of November with fluctuations in the range of 44-45 UAH/€ as the most probable, although there is a certain probability of further smooth decline. Those who bought Euro currency in August this year may soon get into the zone of exchange rate losses in case this trend continues. For those who bought in earlier periods, the euro still provides exchange rate income.

- Medium-term: The euro is most likely to appreciate over the next six months, but specific values can be predicted given the trade, monetary, interest rate and other moves on both sides of the Atlantic to find and establish a strategic exchange rate balance between the US and EU currencies.

- Long-term: The euro remains sensitive to ECB monetary decisions and may be under pressure from the new president's administration's economic and trade policies. However, there is a possibility of gradual strengthening of the European bloc currency against the dollar as a result of stabilization of the European economy.

Upcoming factors influencing the Ukrainian currency market

Among the key ones are still dominant:

Negative:

- Changes in tax policy, in particular higher tax rates for deposit income, which could incentivize the transfer of savings into cash currency or crypto-assets.

- Potential shadowing or temporary shutdown of businesses due to higher tax rates or due to acute infrastructure or security challenges, which could increase demand for currency across all market segments.

Positives:

- Balance between supply and demand without significant distortions and the ability to meet the demand for currency of all economic entities without forming a shortage of currency in any of the segments of this market.

- Sufficient and predictable at this stage financial support from international partners and allies.

- Ability and determination of partners to positively influence the situation in the country by providing assistance.

Recommendations for currency transactions

- Speculation: we recommend to refrain from short-term purchases of the dollar, and the euro can be considered as a tool for obtaining additional exchange rate income when buying it on favorable terms on the background of a decline in the exchange rate.

- Savings: dollar and euro remain the main currencies for savings, which can be formed in any of the currencies available for purchase, taking into account the goals and horizon of future expenditures.

- For businesses, hedging instruments to protect against possible exchange rate fluctuations, advance planning of currency reserves and their structure to prepare for the likely increase in demand in the winter period are especially relevant.

- For any investors with minimal risk appetite - passive income from short- and medium-term investments in fixed-income instruments, such as foreign currency bonds or foreign currency deposits.

- The general recommendation is to support maximum liquidity of the portfolio of reserves, investments and savings for the possibility of prompt adjustment of strategies with the emergence of new strategic benchmarks.

This material has been prepared by the company's analysts and reflects their expert, analytical professional judgment.

The Company and its analysts make no representations and accept no responsibility for any consequences arising from the use of this information. All information is provided as is, without any further warranty of completeness, obligation of timeliness or updating or supplementation.

Users of this material should make their own risk assessments and informed decisions based on their own evaluation and analysis of the situation from various available sources that they themselves deem sufficiently qualified.

BACKGROUND

KIT Group is an international multi-service product FinTech company, which has been successfully operating in the non-banking financial services market for 16 years. One of the flagship activities of the company is currency exchange. KIT Group is one of the largest operators of this segment of the financial market of Ukraine, is included in the list of the largest taxpayers, is one of the industry leaders in terms of asset growth dynamics and equity.

More than 90 branches in 16 largest cities of Ukraine are located in convenient locations for clients and have modern equipment for convenience, security and confidentiality of each transaction.

The company's activities meet the regulatory requirements of the NBU. KIT Group adheres to EU operating standards, having branches in Poland and planning cross-border expansion into European countries.