Ditching the dollar: Will Ukraine peg its currency to euro?

At the end of November, Moldova announced that it was decoupling the exchange rate from the dollar and would use the euro as the base currency to set the official exchange rate of the Moldovan leu.

The Ukrainian National Bank has also previously said that they are considering pegging the hryvnia to the euro instead of the dollar. This is due to Ukraine's course towards European integration and the growing share of currency transactions in euros.

LIGA.net analyzed whether Ukraine will follow Moldova's example and what impact such a change in the national currency peg will have.

What the National Bank says

In the spring of 2024, the National Bank already stated that the structure of transactions in the Ukrainian foreign exchange market confirms the status of the US dollar as the main exchange rate currency. However, in the segment of banks' transactions with clients, the share of transactions in euros in the total volume has been growing since pre-war times. In particular, the share of transactions in euros in non-cash foreign currency purchase transactions by clients has approached 50%.

"The continuation of this trend, given Ukraine's European integration aspirations, may in the near future raise the question of the feasibility of switching from the dollar to the euro as the main currency of the exchange rate peg," the NBU said in its уear-end document.