Approaches to Calculating and Publishing FX Market Indicators (Benchmarks) to Be Updated

The National Bank of Ukraine is proposing for public discussion a draft of new approaches to the calculation and publication of FX market indicators (benchmarks) (the “draft”).

The draft envisages:

• introducing a new FX market benchmark – the reference UAH/EUR exchange rate as of 12 p.m.

The relevance of the benchmark is driven by the increasing weight of euro transactions on Ukraine’s FX market. The new benchmark was developed at market participants’ request, in cooperation with an international technical assistance expert.  It is proposed that the benchmark be calculated daily by multiplying the UAH/USD reference rate as of 12 p.m. by the average BFIX USD/EUR quotation calculated between 10:30 a.m. and 12 p.m.

• adjusting the methodology for calculating the hryvnia’s official exchange rate against foreign currencies (except for the U.S. dollar), and the accounting prices of investment metals, by taking the approaches that are similar to how the reference UAH/EUR rate as of 12 p.m. is calculated

The need to adjust the methodology for calculating the official exchange rate (except for the U.S. dollar) is intended to eliminate certain inconsistencies that will arise as a result of the introduction of the calculation of the reference UAH/EUR rate. The reference UAH/EUR exchange rate as of 12 p.m. will be calculated according to a different statistical basis than the official rate, where the BFIX is taken at a specific moment, rather than as an average over a certain period of time. In view of this, it is recommended that the official exchange rate of the hryvnia against the euro, as well as against other currencies (except the U.S. dollar) and accounting prices of investment metals be calculated using the same methodology as the reference UAH/EUR rate as of 12 p.m., but be calculated as of 15 p.m.

• taking new approaches to compiling the list of currencies for which the official exchange rate is set daily, and canceling the list of currencies for which the official exchange rate is set monthly

The two lists of currencies (daily and monthly) were created many years ago for calculating the official exchange rate, which was justified by the technical difficulties of calculating the official exchange rate for a wide range of currencies on a daily basis.

Currently, the level of automation of calculations has increased significantly, which has reduced the operational limitations and risks of calculating the official exchange rate for any list of currencies on a daily basis. In view of this, and based on international experience, the NBU proposes to form a single daily basket of currencies for setting the official exchange rate. The basket will include foreign currencies of the first group of the Foreign Currencies and Banking Metals Classifier and foreign currencies issued by countries that accounted for at least 95% of trade turnover with Ukraine according to the previous year's balance of payments.

This list will be adjusted once every three years based on the latest statistics on trade turnover. At the same time, it will be possible to adjust the list more frequently if the trade turnover with Ukraine falls below 90% for the currencies included in the list.

For more details on the proposals, their justification, and analytical estimates, please follow the link.

The above changes were supported by the Oversight Council of Monetary and Foreign Exchange Market Indicators of Ukraine, which met on 29 August 2024, and by the Money and Foreign Exchange Markets Contact Group, which met on 26 September 2024. 

Feedback on the abovementioned initiatives can be provided until 15 November 2024 inclusive to the NBU’s official e-mail:  [email protected].

The subject of the email should read as follows: “Changes to the calculation of FX market indicators.”