The Board of the National Bank of Ukraine (NBU) approved the Foreign Exchange Intervention Strategy for 2016-2020, which defines the policy of presence of the central bank in the interbank foreign exchange market under the inflation targeting regime and maintaining of flexible hryvnia exchange rate formation, according to a posting on the regulator`s website.
”Foreign exchange interventions of the NBU are additional to inflation targeting regime as their tasks in the medium term support NBU objective in achieving price stability,” said Serhii Ponomarenko, Director of Open Market Operations Department of the NBU.
Ponomarenko stressed that foreign exchange interventions perform a supplementary role to the main policy instrument, which is the key policy rate. The NBU does not counteract fundamental trends in the forex market, which are based on market factors. Central bank only mitigates temporary effects, which these trends cause to market, he added.
As part of the strategy, the NBU can use foreign exchange interventions to meet the following three tasks: smoothing out the functioning of the foreign exchange market, accumulating international reserves, supporting the transmission of the key policy rate as the main monetary policy instrument, according to the report.
Foreign exchange interventions of the NBU can be performed in four forms – FX auction, single exchange rate intervention, request for best quotation, targeted intervention, according to Ponomarenko.
After further achievement of international reserves target level, the NBU plans to minimize its presence in the FX market, he said.
As UNIAN reported earlier, the National Bank noted the weakening of the official hryvnia exchange rate to the dollar by 2.6% in August, after five months of the national currency strengthening. In September, the hryvnia exchange rate weakened by another 1%. Since the beginning of the year, January through September, the official hryvnia rate to the U.S. dollar has weakened by 7.9%.
