Overview and forecast of hryvnia exchange rate against key currencies from KYT Group analysts
Issue No. 1 - January 2026
The purpose of this review is to provide an analysis of the current situation on the Ukrainian currency market and a forecast of the hryvnia exchange rate against key currencies based on the latest data. We analyze current conditions, market dynamics, key influencing factors, and likely scenarios.
Analysis of the current situation on the currency market
International context
The beginning of 2026 brought bad news for Fed Chairman Jerome Powell as the US Department of Justice served him with a subpoena threatening criminal charges in connection with his testimony before the Senate Banking Committee in June 2025. This testimony partly concerned a multi-year project to renovate the Fed's historic office buildings. Powell himself said that he considers such actions in the context of pressure on the Fed from Donald Trump. "The threat of criminal prosecution is a consequence of the Fed setting interest rates based on our best estimate of what will serve the public, not on the president's preferences. The question is whether the Fed can continue to set interest rates based on data and economic conditions, or whether monetary policy will be guided by political pressure or intimidation," Jerome Powell said in an official statement.
In December, the Fed cut interest rates by a quarter of a percentage point, the third consecutive rate cut in 2025. At the time, the main factor influencing the decision to cut rates was concern about the labor market. The Fed's next interest rate vote will take place at a meeting on January 27-28. However, market participants do not expect any changes at the beginning of the year.
The Fed's forecast calls for only one rate cut in 2026, but the market believes that there could be two rate cuts this year. The economic outlook, of course, complicates the Fed's work. Inflation in the US is expected to remain high, and the labor market is expected to improve in 3-5 months.
Goldman Sachs Research notes that U.S. economic growth will accelerate to 2-2.5% in 2026 due to the reduced impact of tariffs, as well as tax cuts and easier financial conditions, unemployment will be just above 4.4%, and the Fed will cut rates in March and June. Thus, rates will be in the range of 3-3.25%. However, there are other forecasts, for example, JPMorgan expects the Fed to leave interest rates unchanged this year before raising them in the third quarter of 2027. In this case, rates will remain in the range of 3.5-3.75% in 2026.
As for the EUR/USD pair, while in December the dollar was weakening, in particular against the backdrop of the Fed's rate cut, in mid-January the trajectory went in favor of a strong dollar, reaching 1.1635 EUR/USD, while at the end of December it was at 1.1772 EUR/USD. The dollar is currently maintaining its strong position thanks to strong US macroeconomic data and reduced concerns about the independence of the US Federal Reserve. The latest economic data from the US showed a greater-than-expected acceleration in producer prices and a good recovery in retail consumption in November. This allows the Fed to keep interest rates unchanged for now. Accordingly, this situation plays into the hands of the dollar, which has been steadily strengthening in mid-January.
Domestic Ukrainian context
The new year brought an acceleration of devaluation processes to the interbank foreign exchange market. While at the very beginning of January the official exchange rate was at 42.35 UAH/USD, on January 12, the exchange rate crossed the psychological mark of 43 UAH/USD and reached 43.07 UAH/USD. However, the dynamics did not stop there, and as of January 16, the official exchange rate was set at 43.39 UAH/USD.
The NBU has been actively supporting the market with interventions: in December, the NBU's net sales of foreign currency on the interbank market reached a record $4.7 billion, and compared to November, the volume of the NBU's foreign exchange interventions increased by $1.8 billion. The NBU itself explained this increase in foreign exchange interventions by the traditional seasonal factor of increased budget spending and business operations at the end of the year.
International reserves at the beginning of January 2026, according to preliminary data, amounted to $57,292.5 million. The NBU clarified that in December they increased by 4.6% compared to November due to receipts from international partners, which exceeded the NBU's net sale of foreign currency and the country's debt payments in foreign currency. In particular, the government's foreign currency accounts at the NBU received USD 6.915 billion, of which the largest share was received from the EU under the Ukraine Facility (USD 2.69 billion) and USD 3.9 billion came through the World Bank's accounts. In total, Ukraine's international reserves increased by 30.8% in 2025, and the current amount provides financing for 5.9 months of future imports.
The NBU's key policy rate remains unchanged at 15.5% per annum. However, it is likely to be cut in 2026. The NBU reported that in December 2025, inflation continued to slow down to 8% year-on-year. Month-on-month, prices rose by 0.2%. Thus, actual inflation in December 2025 was lower than the NBU's forecast, which says that inflation is expected to slow further in 2026, in particular due to a gradual reduction in labor market imbalances, moderate external price pressures, and the NBU's monetary policy measures. Thus, there remains a high probability that the NBU will decide to cut the key policy rate.
An important issue remains the receipt of international aid in 2026. Earlier, the government and the NBU pointed to the need for external financing at USD 45 billion, most of which is the Ukraine Facility program and funds under the ERA mechanism (a loan secured by the proceeds of frozen Russian assets). On January 14, the European Commission presented a package of legislative proposals that would allow Ukraine to receive the previously approved €90 billion loan in 2026 and 2027. According to the EU, approximately €60 billion will be used for military aid, and another €30 billion for general budget support. By the way, these 30 billion euros will be provided subject to the reforms to be implemented in Ukraine: the European Commission has already noted that in order to receive them, Ukraine needs to implement reforms to improve democratic processes, the rule of law and the fight against corruption.
US dollar exchange rate: dynamics and analysis
General characteristics of market behavior
During the first half of January, the dollar was strengthening on the Ukrainian foreign exchange market. Thus, while at the beginning of the month the interbank exchange rate was at UAH 42.3/USD, on January 15 it was already at UAH 43.55/USD.
Devaluation fluctuations were expected to be faster in the cash market, where the purchase rate in mid-January reached a corridor of UAH 43-43.2 per dollar, and the sale rate was in the range of UAH 43.6-43.7 per dollar. Meanwhile, the spread between the buying and selling rates at bank cash desks and exchange offices remained unchanged compared to December, at UAH 0.4-0.6 per dollar.
Key factors of influence
- International context. The dollar began to strengthen against the euro as investors grew more confident that the Fed would maintain its independence and implement its planned base rate cuts in 2026.
- International reserves are at a high level: as of early January 2026, they reached USD 57.29 billion.
- The NBU has started a phase of controlled devaluation: the interbank exchange rate is steadily moving towards a weaker hryvnia. This is likely to help the government receive more state budget revenues from international aid received by the country in foreign currency.
Forecast.
- Short-term (1-2 weeks): base range of UAH 43.4-43.9 per USD with possible fluctuations towards a weaker hryvnia.
- Medium-term (2-3 months): 43.40-44.80 UAH/USD. The dollar may gradually strengthen in the international market due to the stabilization of the situation in the US in terms of macroeconomic indicators and the Fed's clear and understandable steps to change the base rate. In Ukraine, the hryvnia will be affected by factors such as a significant deterioration in the energy sector as a result of massive shelling, the state budget deficit, the high need to increase imports of energy equipment, and planned foreign aid inflows under previously approved programs and new projects.
- Longer-term (6+ months): The hryvnia will devalue against the dollar, the NBU will be forced to increase interventions from time to time, but the trend toward a weaker national currency will dominate. The benchmark for the first half of 2026 is UAH 43.4-44.9 per dollar.
Euro exchange rate: dynamics and analysis
General characteristics of market behavior
The euro strengthened on the Ukrainian market during the first half of January: the official euro exchange rate was UAH 49.42/€ at the end of December and reached UAH 50.43/€ in mid-January.
Key observations
- Exchange rate geometry: In mid-January, the selling rate for cash euros was at 50.9 UAH/€. The dynamics of the euro exchange rate was influenced by the general devaluation trend, which intensified in the first two weeks of January 2026.
- Supply and demand: Demand for euros remains strong, especially amid high demand from importers to purchase energy equipment from sellers in the European Union. In the cash market, demand for both dollars and euros remains stable.
Key influencing factors
- Global context: the euro is reacting with a slight decline against the dollar due to the stabilization of the macroeconomic situation in the US and no changes in the Fed's monetary policy, which supports the dollar.
- Domestic market: the euro crossed the psychological mark of 50 hryvnia per euro, and demand for the euro remains high both on the interbank market and in the cash segment.
- Behavioral factor: households continue to hold their savings in foreign currency, with both the share of dollars and euros in savings increasing. In December 2025, net purchases of foreign currency by households reached USD 739 million.
Forecast.
- In the short term (1-2 weeks), the euro will be in the range of 50.5-51.5 UAH/€ with the possibility of moving closer to the upper limit.
- Medium-term (2-3 months): the postponement of the next stage of monetary policy easing in the US will keep the trend of a strong dollar in the international market, but Ukraine will see a strengthening of the euro as a result of the general devaluation trend and high demand for the currency from businesses and households. The exchange rate target is 51.5-53.8 UAH/€.
- Longer-term (6+ months): the euro may rise to the level of UAH 54.0-57.0 per EUR in the first half of 2026.
Recommendations: dollar or euro - buy, sell, or wait?
USD/UAH
The strengthening of the dollar, which the markets have been pricing in as a result of optimism about the Fed's monetary policy and expectations for updated US economic data, may be followed by the next stage of the US currency's weakening due to geopolitical risks, a deteriorating US labor market, and investor concerns about the Fed's independence.
The upcoming change of the Fed chairman and the markets' doubts that the new head of the US central bank will continue the policy of the current leadership are a particular risk. This means that the dollar is unlikely to strengthen to 1.1450 in the near future. Meanwhile, the dollar remains the main reserve currency, which means that buying the dollar is advisable both in the long and short-term investment strategy.
In Ukraine, a steady devaluation trend is expected in 2026, which means that dollar savings will be the basis for investors, especially for a long-term currency strategy. If exchange rate fluctuations accelerate toward a stronger dollar, investors will be able to exit some of their dollar savings with a profit.
EUR/UAH
The euro is showing a steady upward trend in the Ukrainian market. This allows investors to plan their exit from this currency, provided that the benchmarks set out in their individual investment strategy are achieved. In order to diversify part of your savings, you should also consider buying tranches of euro currency at times of exchange rate stability. It is advisable to keep about 30-40% of your savings in euros, depending on the currency plan you choose.
Overall strategy
In January 2026, expectations of the next round of Fed key policy rate cuts and US inflation data will contribute to a weaker US currency. Meanwhile, the EU economy has stabilized, with the ECB reporting that inflation was 2.0% in December, economic activity remained stable, and the unemployment rate in the EU is close to a historic low. Compared to previous forecasts, EU economic growth was revised upward to above 1% this year and to 1.4% in the following years. All of this points to a low probability of rate changes in the EU in the near future, which will also support the euro.
As expectations of further hryvnia depreciation prevail in Ukraine, this allows investors to plan both a medium- and long-term strategy for building foreign currency savings, taking into account the strong positions of the dollar and euro. The main rule is that if short-term speculative transactions are required, the euro is the right currency. For long-term and medium-term investments, it is worth considering the US dollar as the underlying asset, which provides both low-risk investments and the possibility of receiving a stable profit. It is important to analyze not only the trends of the domestic currency market, but also the behavior of the EUR/USD currency pair on the global markets. This will allow you to revise your strategy in a timely manner and increase the level of return on foreign exchange investments.
This material has been prepared by analysts of the international multiservice product FinTech platform KYT Group and reflects their expert, analytical professional judgment. The information presented in this review is for informational purposes only and cannot be considered 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 further warranty of completeness, obligation to be timely or to be updated or supplemented.
Users of this material should make their own risk assessment and informed decisions based on their own evaluation and analysis of the situation from various available sources that they consider to be sufficiently qualified. We recommend that you consult an independent financial advisor before making any investment decisions.
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