According to the official statement made by National Bank of Ukraine, official USD/UAH exchange rate is estimated at UAH 8.70 per USD 1 as of February 7, 2014, which is 8.8% higher compared to UAH 7.99 per USD 1 as of February 6, 2014. National currency depreciation is attributed to the most recent internal and external events, as noted by the Head of National Bank of Ukraine, Igor Sorkin. On February 6, interbank exchange rate reached UAH 9 per USD 1 and continued to climb, after declining slightly by UAH 0.20 towards the end of the trading session. National Bank of Ukraine made a decision to adjust UAH/USD exchange rate on a daily basis from now on, as adjustments will take into account interbank exchange rate. As political situation remains unstable, both local and foreign investors do not feel comfortable keeping their funds in Ukrainian banks, transferring them overseas. Such situation led to significant increase in demand for dollar, which is the usual reaction of Ukrainian population, that still remembers hyper-inflation and currency depreciation of 1990s.

Alex Morgun, Financial Analyst of UrkAgroConsult notes that as per usual, currency depreciation will benefit those entities that export their products, and receive revenues in foreign currency (U.S. dollars in this case), while purchasing raw materials and employing labor in Ukraine. National producers that have to compete with imported products will now become more competitive in terms of prices as imported goods will become more expensive. Credit loans, provided to individuals and companies in U.S. dollars in the past will become bigger burden on these companies. Ukrainian Agrarian sector, for that matter is facing additional challenge in the face of currency depreciation risk. While the depreciation was expected by most, Ukrainian holdings had difficult 2013 with decline in commodity prices and high finance costs due to loans received earlier. At the same time majority of these holding companies were aiming to increase volume of their exports abroad, which would help to mitigate those currency risks. Price trends for most common agricultural commodities for Ukraine will play key role in financial performance of Ukrainian companies in 2014. Burden of rising financial costs will be reflected in reports for the first 3-6 months of 2014.

UkrAgroConsult