Ukrainian Central Bank Complicates Foreign Exchange Purchases

The move comes amid increasing pressure on the Eastern European nation's currency due to heightened geopolitical tensions and a rapidly

National_Bank_of_Ukraine_(logo)According to an announcement made by the National Bank of Ukraine, the country’s central bank, in order to stabilize the situation in the currency market, the watchdog will impose a 3-day ban on foreign currency purchases for commercial banks.

The move is likely to impact brokers operating in the region for a limited period of time, as the tensions between Russian gas suppliers and the current Ukrainian government have been rising in recent weeks. According to the statement issued by the National Bank of Ukraine, the move is aimed at balancing the dynamics of the local foreign exchange market.

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According to the central bank’s resolution, commercial bank deposits in the local currency, hryvnia, have to be deposited upfront to a separate account for three full days before a purchase can be completed.

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The central bank is willing to introduce some uncertainty regarding the exchange rate that the banks and their clients will get for this operation in order to stem the outflows from the local exchange unit.

In order to purchase foreign currency on behalf of their clients, the funds will have to be transferred not earlier than the fourth day from the date of these funds being credited to the designated account.

Advance payments in foreign currency under import contracts of clients exceeding USD 50,000 shall be executed not earlier than the fourth business day from the date the bank submitted information to the register.

The restrictions which the Ukrainian central bank has introduced are temporary. Commercial banks are still allowed to conduct their own transactions involving the purchase of non-cash foreign currency using hryvnias within the limits set on the open foreign exchange position in an amount not exceeding 0.5 percent of the bank’s regulatory capital within a single business day.

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