Revising the 2019
6 highlights in the financial market of Ukraine last year
FX LIBERALIZATION. Revolutionary by its essence, the Law of Ukraine "On Currency and Currency Operations" together with a new liberal NBU regulatory framework for the FX market regulation entered into force. Mandatory currency sales, dividend repatriation limit, pre-reservation of hryvnia for currency purchase, banning on currency purchase for loans, etc. were canceled for business. Citizens are allowed for buying currency online, and the daily limit on currency purchases has been canceled too. A convenient e-limits system for investing abroad both by individuals and legal entities has been introduced. In total, about 40 currency mitigation have been made. Large-scale currency liberalization had no a negative impact on the FX market and had been positively received by business and society.
CLEARSTREAM LINKS AND DOMESTIC GOVERNMENT LOAN BONDS (OVDPs) MARKET DEVELOPMENT. The establishment a link between the Clearstream international depositary and the NBU depositary has eliminated technical and administrative obstacles to the foreign investment inflow into government securities. As a result, non-residents have invested around $ 4.3 billion in the domestic government loan bonds (OVDPs) at the end of 2019. And the volume of transactions within the domestic government loan bonds (OVDPs) denominated in UAH has increased by over 70% - from UAH 72 billion to UAH 123 billion in 2019.
FX MARKET INCREASING. Due to the increased exports and foreign investment inflows, the interbank FX market exceeded $ 94 billion in 2019. Compared to last year, the average daily volume of transactions between banks increased by 1.5 times up to $ 380 million. The situation on the cash market, which increased by 40%, remained positive. The citizens continued to sell currencies more than to buy, like in the previous three years.
FOREIGN EXCHANGE RESERVES INCREASING. Ukraine's FX reserves increased to the seven years highest level up to $ 25.3 billion. Note that such increasing occurred within the peak external debt payments year, so this is evidence of a further macro-financial stability strengthening.
RECORD LEVEL OF NBU'S NET CURRENCY PURCHASE. The favourable situation on the FX market during almost the whole year enabled the NBU for purchasing the excess currency formed due the proceeds from exporters and foreign investors. In general, the NBU's net purchase of foreign currency last year reached $ 7.9 billion. This is the highest value for the last 14 years.
STRENGTHENING HRYVNIA. The hryvnia rate has increased by more than 14% under the influence of market factors, and its average daily value was 5% higher than in 2018. The hryvnia's first ever rapid revaluation in the Ukrainian history has become an important factor in inflation slowdown and the foundation for strengthening confidence in the national currency and further de-dollarization of the economy.