Dollar at a new high: NBU rate for 26 October and whether FX government bonds can replace buying foreign currency

The National Bank of Ukraine set the official foreign exchange rates for Monday, 26 October. The dollar strengthened, reaching a historic high; the euro also rose in value.

NBU exchange rates For Monday, 26 October, the NBU set the official dollar rate at 45,20 UAH. That is 15 kopecks more than on Friday, 23 October, when the US currency cost 45,05 UAH. The new figure is the historic maximum for the official dollar rate. The official euro rate also increased. On 26 October it is 50,57 UAH — 14 kopecks more than on 23 October, when the euro rate was 50,43 UAH. Photo: NBU exchange rates on 26 October (infographic by RBC-Ukraine) Read also: Where it’s cheapest to buy dollars and euros: exchange rates at banks and exchange offices 23 October Can FX government bonds replace buying dollars or euros? Foreign-currency domestic government bonds can be an alternative to simply buying foreign currency; however, their availability is currently limited. Financial analyst Andriy Shevchyshyn told RBC-Ukraine this in a comment. According to him, there are few FX government bonds on the market because of current currency restrictions. Previously, such bonds were often used to circumvent those restrictions, so the Ministry of Finance and the National Bank are trying to reduce their number. Because of this, investors may have a hard time finding FX bonds to buy. The main difference between FX government bonds and simply buying dollars or euros is the ability to receive coupon payments. Buying currency itself does not generate additional income — you can profit from it, for example, if the exchange rate rises. Shevchyshyn also drew attention to the question of guarantees on government bonds. In his view, the default risk on hryvnia-denominated government bonds is low, because it is easier for the state to make payments in its own currency than to renege on domestic obligations. In international practice, defaults on bonds in a country’s own currency are rare. Exceptions may be associated with revolutions or a radical change of government, when the new leadership refuses to honor the obligations of predecessors. Thus, FX government bonds differ from simply holding dollars or euros by offering coupon income. At the same time, because supply is limited, buying such bonds may be more difficult than buying currency. Read also: Why the dollar and the euro can move in opposite directions: Taras Kozak explained how the market works