Guest Blogger From Kiev Shares Insights Into NBU's Decision

This guest blog post is written by Vladimir Bezruchenko

ABOUT THE AUTHOR: Vladimir Bezruchenkois an independent trader based in Kiev, Ukraine. He has been actively trading from home since 2013. He specializes in US natural gas futures (NYMEX Henry Hub) and high-yielding commodity currencies.

Ukraine’s national currency, hryvna, has been under constant pressure since early last year due to wide uncertainty induced by local political instability and economic decline. The currency lost 66% of its value over the course of one year and some 43% in just the last month.

Such wild Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term prompted the government to intervene and impose new rules and regulations, culminating on February 25 when the regulator prohibited most foreign currency trading among legal entities until February 27, a decision that most commentators described as sheer panic. Ukraine’s central bank (the NBU) effectively closed the interbank currency market and created the situation where it became impossible to determine the true value of hryvna.

However, less than a day after imposing its ban on currency trading, the NBU abruptly reversed its course on February 26 and removed the ban. It has been reported that NBU actions drew strong criticism from Prime Minister Arseny Yatseniuk (himself a former head of NBU) and so the central bank did a sudden U-turn without giving any explanations.

Later that day the Finance Minister Natalia Yaresko and NBU governor Valeria Gontareva gave a press conference where they said that the recent plunge in the currency was driven by pure speculation and was completely unfounded. They also gave assurance that the exchange rate would stabilize once the country receives funds from the IMF.

Indeed, Ukraine is on the verge of bankruptcy and urgently needs additional funds to support its external financial position. The IMF, which is already actively negotiating with the government, has said that it was ready to assist Ukraine with foreign exchange.

While it is clear that the IMF bailout would help alleviate the situation, Ukraine still must introduce swift and dramatic economic reforms in order to ensure the country’s long-term prosperity. There are three major issues that need to be tackled:

1. Ukraine’s massive and chronic current account deficit

2. Poor Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term of the interbank market, which spurs unhealthy speculation and huge capital outflows

3. A low level of trust in the national currency among the population

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