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National Bank revises methodology of official UAH/USD exchange rate, its publication timing

Source : 112 Ukraine

The National Bank of Ukraine has revised its methodology for the calculation of the official UAH/USD exchange rate, updated the sources of information that is used for the calculation and expedited the time of its publication.
14:47, 25 July 2018

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According to the decision made, the official UAH/USD exchange rate is going to be calculated based on the information on all TOD, TOM and swap purchase-sale agreements of U.S. dollars that were concluded by banks on the inter-bank currency market of Ukraine with other banks and the National Bank of Ukraine, and the information that is supplied to the National Bank by trade-reporting systems before 15:30 of a given business day.

The new methodology for calculation provides for a two-level system of cutting off those agreements, the parameters of which deviate from the parameters of the majority of agreements concluded on that day, and this is why such deals are not representative for their inclusion into the calculation of the official UAH/USD exchange rate. First of all, all the contracts, the exchange rate of which deviates from the mean by more than 2% are excluded from the current stock of agreements. Then, the calculation excludes the mean exchange rate/ volume by an amount of 2 standard deviations.

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The calculation of the official UAH/USD exchange rate is going to be based on the mean average of all the agreements left in the stock after all the exclusions have been made.

The official exchange rate is going to be published on the official website of the National Bank of Ukraine before 16:00, meaning two hours earlier than currently.  

Up until now, the official UAH/USD exchange rate is calculated as the weighted mean value of all the aforementioned inter-bank contracts for the day as provided by the data from the inter-bank currency agreement authorization system of Ukraine, meaning without cutting off the non-representative deals.

 The new provisions for the calculation of the hryvnya exchange relative to the U.S. dollar also provide for the presence of a reserve mechanism of its calculation for the case wherein the number of agreements that may be included in the calculation of the official hryvnya exchange rate is 10% or less of the weighted average of the similar figure for the previous month. This mechanism supposes that the National Bank of Ukraine filing a request to banks (via TIC functionals or via phone) regarding the receipt of rates for the sale-purchase of $1 million and a further calculation of the official exchange rate as the normal weighted average of all rates received in the course of filing such request.

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Up until now, the reserve mechanism for the calculation of the official UAH/USD exchange rate has been absent.

The mechanism for the calculation of the official exchange rate of the hryvnia relative to other currencies remains unchanged.

Apart from the official UAH/USD exchange rate, the National Bank will also implement a daily calculation of the reference UAH/USD exchange rate. It is going to be calculated based on the methodology used for the calculation of the official UAH/USD exchange rate, but it will be based on the information about inter-bank currency deals concluded before noon, and it will be published on the National Bank’s website before 12:30.  

The implementation of the new methodology for the calculation of the official UAH/USD exchange rate brings it closer to the international standards for the calculation of similar figures, and is going to enable the use of the official UAH/USD exchange rate not just for bookkeeping purposes, but also as a benchmark for the currency market. That, in turn, could be used for drafting agreements to be entered into by market players, where the foreign currency would serve as the base asset.  

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The aforementioned decisions have been confirmed by the decree of the Board #80 dated 19 July 2018 “On certain specifications of setting the official exchange rate of the hryvnia relative to foreign currencies and on introducing changes to the Classificator of foreign currencies and banking metals”, which is becoming effective on 1 August 2018.

 
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