Overview and Forecast of the Hryvnia Exchange Rate Against Major Currencies by KYT Group Analysts

Issue No. 2 – May 2026

Analysis of the Current Situation in Ukraine’s Foreign Exchange Market

Throughout May, the hryvnia exchange rate slowly followed a path of devaluation; however, the hryvnia depreciated so gradually that a relatively stable equilibrium effectively formed in the market. Demand did not grow significantly, and in the interbank market, the NBU continues to act as the key market maker, supplying currency through interventions.

Despite the absence of panic and frenzied demand for foreign currency, the hryvnia is hitting new highs—the exchange rate has crossed the 44.2 UAH/USD threshold. There are signs that a reversal should not be expected in the near future. To meet the state budget’s needs, the government must convert financial aid and loan tranches received from partners and donors—denominated in euros and dollars—into hryvnia, which automatically contributes to the hryvnia’s weakening. The strengthening of the dollar on the global market has also worked against the hryvnia: investors are seeking opportunities to invest specifically in dollar-denominated assets, particularly U.S. Treasury bonds, which bolsters confidence in the U.S. currency, whose exchange rate is strengthening despite negative foreign policy developments related to the absence of a peace agreement between Washington and Tehran. The hryvnia’s future exchange rate trajectory depends on domestic demand for foreign currency, the state of the NBU’s international reserves, the Ministry of Finance’s need for new volumes of domestic government bond issues, and fluctuations in the dollar’s exchange rate against the euro on the global market, as well as global oil price dynamics.

Global Context

The Federal Reserve, which decided at its April meeting not to change the key interest rate, now faces a dilemma regarding how to curb the surge in inflation. According to Minneapolis Fed President Neel Kashkari, reducing inflation in the U.S. remains the top priority, as inflation continues to exceed the Federal Reserve’s 2% target. However, he emphasized that the U.S. central bank will continue to apply a “balanced approach” to its dual mandate of price stability and full employment. In effect, this implies a possible decision by the Fed to raise rates as early as the June Federal Open Market Committee meeting.

The war in Iran remains the main factor affecting the U.S. economy. The parties have yet to reach any substantive negotiations. In late May, the U.S. launched new strikes in Iran. In response, Iran attacked a U.S. airbase in Kuwait. U.S. President Donald Trump stated that the country could strike Oman due to its attempts to establish control over the Strait of Hormuz alongside Iran. Trump demands complete freedom of navigation through the strait and is threatening a large-scale attack on Oman.

Geopolitical tensions in the Middle East are reflected in fluctuations in oil prices. At the end of May, the price of Brent crude rose by more than 2% to approximately $95 per barrel, while the price of WTI crude also rose by more than 2% to $91 per barrel. The price increase occurred after the U.S. carried out new attacks on Iran, targeting a military facility in Bandar Abbas, a strategically important port city.

Meanwhile, the U.S. dollar has been steadily strengthening against the euro in May. While the dollar traded at 1.1779 USD/EUR at the beginning of the month, it stood at 1.1636 USD/EUR by the end of May. As of the end of May, the DXY index shows a 0.72% increase in the U.S. dollar’s exchange rate over the past month. The dollar is being supported by interest rates on US Treasury bonds, which remain quite high, as well as investors’ hopes for a resolution to the conflict in the Middle East.

Domestic Ukrainian Context

In May, the Ukrainian foreign exchange market saw a moderate decline in demand for foreign currency. Average weekly currency sales on the interbank market in April amounted to $817 million, while the average weekly figure for the first three weeks of May was $745 million. During April, the NBU sold $4.08 billion through interventions, and $2.23 billion over the first three weeks of May. The hryvnia exchange rate has been gradually moving toward devaluation since early May; however, while it stabilized at 43.96 UAH per dollar in the first half of May, it began to fall more rapidly in the last ten days of the month, and as of May 29, the NBU’s official exchange rate stood at 44.26 UAH/USD. The cash market in Ukraine was also affected by weakening demand in May; official data on sales and purchase volumes and the cash market balance are expected to be released in early June, but preliminarily there should be no surprises—it likely indicates a trend toward increased currency sales rather than purchases.

Throughout May, the hryvnia was supported by positive sentiment regarding future inflows of funds from partners, as well as by the decline in oil prices on the international market. The European Commission recently announced that in June, the EU plans to transfer €9.1 billion in financial aid to Ukraine.

Thus, €5.9 billion will be allocated for Ukraine’s defense needs, and €3.2 billion for budget support. This is the first tranche under the European Union’s loan program totaling €90 billion. Another inflow of funds is planned for June—€2.8 billion under the Ukraine Facility mechanism. However, there are still doubts regarding the IMF loan program and the June disbursement from the fund.

On May 27, an International Monetary Fund mission began its work in Kyiv. It is tasked with assessing Ukraine’s compliance with the requirements for the release of the next tranche. Earlier reports indicated that the key issue in agreeing on the program’s milestones is tax policy, particularly the taxation of electronic platforms. Tax Bill No. 12360 was submitted to parliament and even reached a vote. However, on May 26, the Verkhovna Rada did not support key amendments to the bill, which provided for the abolition of tax exemptions on international parcels up to 150 euros. Failure to meet the program’s key tax milestone calls into question Ukraine’s ability to quickly receive tranches from the IMF.

U.S. Dollar Exchange Rate: Trends and Analysis

Controlled devaluation in the domestic foreign exchange market in May proceeded smoothly and without surprises. The official exchange rate at the beginning of the month stood at 43.96 UAH/USD, and on May 29, it was 44.26 UAH/USD. On the interbank market, the rate stood at 43.9–43.95 UAH per dollar in early May, and by the end of the month, the interbank rate had shifted to 44.28–44.31 UAH/USD. The National Bank remains the primary seller of currency, which it sells through currency interventions; no panic demand was observed in May.

The cash market was also calm in May; citizens are calmly buying and selling dollars and euros at exchange offices and banks, and there is no currency shortage. As of early May, the buying rate for cash dollars was 43.55–43.80 UAH/USD, and the selling rate was 44.10–44.25 UAH/USD. By the end of the month, the buying rate was 43.95–44.15 UAH/USD, and the selling rate was 44.35–44.6 UAH/USD. Spreads at the end of May rose to 0.5–0.7 UAH/USD.

Key influencing factors:

· Slow exchange rate fluctuations and subdued demand for foreign currency in May. The hryvnia is depreciating, but there is no panic buying; the NBU is meeting importers’ requests.

· Cash market – no currency shortage. Exchange offices and banks have sufficient amounts of dollars, and the public is showing subdued demand for foreign currency.

· International factors: The latest escalation in the Middle East is affecting investment plans; however, recent trends point to growing confidence in the dollar and dollar-denominated assets, and the dollar is steadily strengthening on the international market.

· Market behavioral expectations: while the international market is focused on the new Fed chair and the June FOMC meeting, where key interest rates will be discussed, in Ukraine, the greatest hopes rest on the absence of significant infrastructure damage in the near future, which would reduce the need for foreign currency to import equipment. The exchange rate is also influenced by the situation regarding the receipt of financial aid and the state of international reserves.

Forecast

• Short term (1–2 weeks): base range 44.20–44.45 UAH/USD; there is also a possibility of a situational strengthening of the hryvnia, but the devaluation trend will return in the future.
• Medium term (2–3 months): 44.20–44.90 UAH/USD. With the conflict in the Middle East still unresolved and the oil market completely dependent on messages from the White House, the dollar on the international market will remain in a state of uncertainty and constant fluctuations, both toward strengthening and toward losing ground. Following the conclusion of a peace agreement between the U.S. and Iran, the U.S. dollar may strengthen its position.
• Long-term (6+ months): In the baseline scenario, the depreciation trend remains dominant, and the exchange rate could reach 44.95–45.85 UAH/$. The most important influencing factor will remain the war in Ukraine and Ukraine’s need to close the state budget deficit and replenish international reserves using funds from the European Union and other donors. Until the fall, there is still a likelihood of a gradual devaluation without sharp spikes; however, after September, the situation may change dramatically. The National Bank will remain the primary seller of currency on the market.

Euro Exchange Rate: Dynamics and Analysis

Throughout May, the euro moved within a weakening trend against the dollar, and this trend was fully reflected in the Ukrainian foreign exchange market. While May began at 51.46 UAH/EUR, by the end of May the exchange rate reached 51.43 UAH/EUR.

The cash market did not change significantly despite the hryvnia’s gradual strengthening against the euro. While the buying rate stood at 50.95–51.4 UAH/EUR in early May, and the selling rate was within the range of 51.75–52.10 UAH/EUR, by the end of May the buying rate was 50.85–51.3 UAH/EUR, and the selling rate was 51.75–51.90 UAH/EUR. As for spreads, they range from 0.4–0.6 UAH/EUR for most participants, with only a few seeing spreads rise to 0.9–1 UAH/EUR.

Key influencing factors:

· On the international market, the trend of a strong euro has given way to a strengthening dollar. In May, the dollar strengthened its position thanks to investor optimism and attractive yields on U.S. government bonds, though the war in Iran still influences the exchange rate trajectories of major currencies.

· Inflation in the EU is rising, but the ECB is taking a wait-and-see approach and not changing rates. It is expected that the ECB may raise interest rates in June, even if the war in the Middle East ends. Experts are convinced that the EU central bank will increase borrowing costs by 0.25 percentage points due to rising energy prices, which are significantly driving up inflation in Europe.

· Demand for the euro in Ukraine has stabilized. The cash market is influenced by currency supply from the public; there is no shortage of cash euros.

Forecast:

· Short term (2–4 weeks): on the Ukrainian market, the euro may remain within the range of 51.45–51.85 UAH/€.

· Medium term (2–4 months): if the ECB raises interest rates, the euro exchange rate on the international market is likely to strengthen; in Ukraine, fluctuations within the range of 51.80–52.50 UAH/€ are possible.

· Long term (6+ months): the euro exchange rate may remain within the range of 52.20–53.80 UAH/€. The main influencing factors are the war in the Middle East, oil market prices, the inflation rate in the Eurozone, and the ECB’s decisions on key interest rates.

Recommendations for Businesses and Investors

The dollar is steadily strengthening on the international market. Confidence in the U.S. currency is growing despite the ongoing escalation in the Middle East. The dollar’s strengthening implies a possible acceleration of the hryvnia’s depreciation trend.

War in Iran is one of the factors influencing the exchange rate, but it is no longer the key one. Negotiations between the U.S. and Iran have not yet reached the home stretch, but investors are once again actively buying U.S. Treasury bonds. This signals continued investment in dollar-denominated assets, and in Ukraine, it signals the purchase of dollars as a reliable currency for building savings.

The Fed is preparing to change key interest rates. Possible rate changes as early as June could briefly disrupt the strong dollar trend in the global market; however, if a portfolio includes several liquid currencies, this helps minimize risks.

The U.S. dollar’s dominant position in the global market leaves no doubt: investing in the dollar is a reliable source of profit. Despite accelerating inflation, the U.S. economy is growing, and the dollar remains a liquid currency, so investors should keep at least 50% of their assets in dollars.

Safe investments – a guarantee of capital preservation. In all financial scenarios, investors should identify stable sources of profit and ensure the reliability of their asset allocations.

Geopolitical tensions as a factor influencing investment plans. A successful resumption of negotiations between Washington and Tehran would signal further positive prospects for the dollar’s exchange rate trajectory.

Oil prices – a key indicator of changes in the currency market. Rising oil prices could increase the EU’s dependence on high energy costs, which would weaken the euro’s position while strengthening the dollar’s.

Focus on liquid currencies. Despite geopolitical risks and inflationary spikes in both the EU and the US, the dollar and the euro remain the core currencies for investors and should be included in both short-term and long-term currency strategies.

Diversification is the key to safe investments. Investors should build currency portfolios across various currencies, and while the dollar and euro remain the core assets, it is advisable to periodically allocate funds to other reliable European currencies—such as the British pound and the Swiss franc.

The hryvnia – for short-term trading. The national currency is on a devaluation trajectory; therefore, long-term savings are best held in foreign currencies, while the hryvnia should be kept only in the amount needed for quick investments in the national currency.

What’s important in the news. It is necessary to monitor everything related to the war in Iran, as well as the trajectory of oil prices. In June, news from the U.S. regarding the Fed’s key rate, as well as the ECB’s decision on the base rate, will be essential to monitor. In Ukraine, the main indicators of the situation in the foreign exchange market will be developments on the front lines, information regarding the state of the energy sector, news from the IMF, and updates on the receipt of new loan tranches and international financial aid.

This material was prepared by analysts at KYT Group, an international multi-service product FinTech platform, and reflects their expert, analytical, and professional judgment. The information presented in this review is for informational purposes only and should not be construed as a recommendation for action.

The company and its analysts make no representations and assume no liability for any consequences arising from the use of this information. All information is provided “as is,” without any additional warranties of completeness, obligations regarding timeliness, or updates or supplements.

Users of this material should independently assess risks and make informed decisions based on their own evaluation and analysis of the situation using various available sources that they themselves deem sufficiently qualified. Before making any investment decisions, we recommend consulting with an independent financial advisor.

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