Hryvnia at a Crossroads: Climb or Collapse?

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2026 began not only with bitter cold, renewed Russian attacks causing heating and water shortages, and the frantic chaos of Oreshnik — but also with a new wave of panic as the hryvnia plunged. At times, it feels like watching it fall from a skyscraper.

But what is the reality? The hryvnia, having started 2026 at 42.3, has reached a level of 43.1–43.2. If you look closely at the numbers, this represents a movement of just 2 percent — in other words, practically nothing.

Yet we still hear talk of a “historical low” and the “record weakening of the hryvnia.” Indeed, the hryvnia has rarely been strong, but it would be strange for it to appreciate during a war. This is generally not typical for the hryvnia, or for the currency of any developing country. And again, in percentage terms, the movement is marginal. The euro-dollar pair experiences fluctuations of this magnitude regularly on the global currency market.

So why did we see this movement? The National Bank could provide a precise explanation, but it remains fundamentally silent. It is the NBU’s policy not to comment on short-term exchange rate movements — and this is entirely understandable.

But again, why? The first and most logical explanation is seasonality. The hryvnia has always exhibited seasonal fluctuations, even before the full-scale invasion. It tends to strengthen in the spring, when Ukrainian farmers convert dollars during the sowing campaign and spend hryvnias. Conversely, it weakens in the fall, when the same farmers replenish their dollar holdings after the harvest. This is typical behaviour for the currency of an agricultural powerhouse, where people prefer cash and are reluctant to pay taxes. The hryvnia also weakens in the first weeks of the year, starting a downward trend that often begins in the last week of December. And so we are seeing this pattern once again.

Why does the hryvnia behave this way? Why does it weaken during the New Year holidays? The answer lies in the budget. Specifically, the government spends heavily in the final weeks of the year, including closing out programs and paying various 13th-month salaries to state employees. Altogether, this injects a much larger volume of hryvnia into circulation than usual. In December 2025, for example, the budget was not spent $10 billion (the average in previous years), but about $20 billion — $10 billion more than usual. At the start of the new year, this increased supply of hryvnia naturally put pressure on the exchange rate.

Yes, the exchange rate is not currently fully market-based, which is understandable. While the war continues, the rate cannot, by definition, be entirely determined by the market. It remains under the control of the National Bank. However, the NBU attempts to take currency realities into account. At the end of last year, the regulator also promised to give the exchange rate more flexibility, allowing for greater amplitude in fluctuations. Additionally, inflation has continued to decline, with the latest figure at 8 percent. The NBU’s strict monetary policy has already had a measurable impact.

So, this is not a nutcracker. And it’s not Trump. And it’s not a harbinger of impending doom. This is simply a return to normality — when seasonality matters and the exchange rate can fluctuate a few percent without signalling anything alarming.

Last year, the exchange rate opened at 42.3 and closed it at the same level. Incidentally, this allowed people who bought government hryvnia bonds (military bonds) to earn 16 percent per year — in dollars. That’s an exceptionally high yield. Little will change this year. Even if the rate ends up at 43–44 by the end of the year, that would represent only a 5 percent shift — still enough to generate strong returns for those staying in hryvnia and buying government debt.

The conclusion? Nothing catastrophic is happening. This is normal seasonal pressure, which will dissipate within one to two weeks. And there’s no need to drag Arestovich into the discussion — sometimes that’s just unnecessary.

The exchange rate remains controlled. The National Bank starts the year with record reserves, and Ukraine, having received unprecedented external support in 2025, enters 2026 with guaranteed financial stability. There is therefore no reason to expect any man-made financial disasters, even in these bitterly cold days.

The hryvnia isn’t going anywhere. Although, like all of us, I might want to escape to warmer climes right now.

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