OREANDA-NEWS. In the opinion of Raiffeisen Bank Aval experts, despite intensifying talks about forthcoming hryvnia appreciation hryvnia will remain stable at least in the short-run, the press service of the Bank discloses. According to Dimitry Sologubb, Head of Research Department at Raiffeisen Bank Aval, taking into account continued political uncertainty and turbulences in the global financial markets, the National Bank is not likely to change hryvnia exchange rate in the nearest future.

At the same time, it is an open question what would be the hryvnia exchange rate if the NBU will introduce greater exchange rate flexibility. At the moment, despite deteriorating global financial conditions, inflow of portfolio investment to Ukraine has not stopped as stock market continues to boom, plus Ukrainian banks (mostly foreign-owned) are attracting foreign borrowings. Besides, direct investment is coming in as well despite political uncertainty. Therefore, capital inflow is offsetting the negative effect of deteriorating trade balance and international reserves of the NBU are rising. "Thus, at this stage greater exchange rate flexibility probably is likely to lead to a slight hryvnia appreciation," Dimitry Sologub said. However, talking about long-run events, one should take into account a number of factors that will affect hryvnia exchange rate. For example, significant inflow of foreign investment on the eve of EURO 2012 and  an implementation of structural reforms would play for hryvnia strengthening. Therefore, Ukraine will follow the path of other Eastern European countries where national currencies were appreciating as the economies were being liberalized. At the same time, deterioration in terms of trade over next few years (including further hike in import gas price and fall in world metal prices) would put a depreciation pressure on the national currency. Therefore, the prospects for hryvnia exchange rate in the long-run remain unclear. In the opinion of the expert, exchange rate policy should not be about revaluation or depreciation, but rather about the choice of optimal exchange rate regime, which would stimulate economic development and ensure macroeconomic stability. "Taking into account Ukraine's high trade openness and rising dependence on international financial markets, more flexible exchange rate would be more efficient in smoothening the influence of external shocks on Ukrainian economy. Besides, having abandoned the fixed exchange rate the NBU is likely to do better with its inflation controlling function," Dimitry Sologub said.