UNTYPICAL FACTORS INFLUENCING THE DEVELOPMENT OF THE FOREIGN EXCHANGE MARKET OF UKRAINE DURING WARTIME

Abstract

The need to identify unique factors that contributed to the development of trends in the Ukrainian foreign exchange market during the war brought about this study. The purpose of the paper is to identify the features of the manifestation of atypical factors influencing the development of Ukraine’s foreign exchange market in wartime. The purpose is achieved by identifying and analyzing a number of factors that, until recently, were not typical for Ukraine in the development of foreign exchange market trends, including the shutdown of numerous businesses and bank branches, tougher restrictions on currency operations, public panic, rapid migration and emigration, an increase in unemployment, the activation of speculators, unanticipated and unplanned amounts of foreign funding and international support. Keeping the exchange rate at a reasonable level, managing inflation, maintaining enough foreign reserves, and balancing the purchase and sale of foreign currency in cash and non-cash circulation were some of the consequences of the stabilization measures implemented by the NBU that were examined. It was highlighted that the current difference between the actual US dollar purchase rate and the official level is not considerable, indicating that there is no panic in the market and that the state regulator’s monetary policy is generally effective. It was substantiated that the temporary fixation of the exchange rate, the established restrictions on currency transactions, limitations on withdrawals from accounts held in foreign currencies, and raising the interest rate on deposits made in the local currency, among other measures, made it possible to curb panic and served as a solid foundation for stabilizing Ukraine’s entire financial system. Given the significant psychological impact on the currency market during times of war, it was determined that strict restrictions on currency transactions, ongoing and systematic informing of the population regarding the state of the banking system and the currency market, and the timely publication of a plan of measures to regulate and stabilize the general socioeconomic situation all contributed to the overall positive effect of keeping the currency market from the crisis. The findings of this study support the claim that the Ukrainian financial system is now acquiring crucial experience in handling a crisis situation on the foreign exchange market while martial law is in effect.