Strengthening the hryvnia as a tool for combating inflation could lead to negative consequences, both for price dynamics and in terms of the inflow of long-term investments, believes Serhiy Yaremenko, deputy head of the National Bank of Ukraine (NBU). \n \nHe expressed this opinion in an interview with the magazine "Profil". \n \nAccording to him, calculations show that a 10% revaluation of the national currency leads to a 2% reduction in inflation. But this only works in market economies, whereas in transitional ones it can lead to destabilization on the market, noted S. Yaremenko. \n \n"If the National Bank devalues the currency, then tomorrow everyone will go and sell it, knowing what the exchange rate will be after some time. The hryvnia received as a result will be exchanged for goods, which will lead to an increase in aggregate demand. And, consequently, to price growth, which this measure was initially called upon to combat. Where is the logic?" S. Yaremenko wonders. \n \nAt the same time, the banker acknowledges that there are grounds for revaluing the hryvnia: "Yes, the hryvnia needs to be revalued, no one was hiding this. But this can be done without trumpeting it to the whole market, but by applying the instruments that the National Bank considers appropriate. One can, of course, announce to the whole country that such and such an exchange rate will be. But when players know the direction of market movement, it is impossible to fight them," emphasized S. Yaremenko. \n \nAt the same time, according to him, as of today the NBU cannot afford to reduce its presence on the interbank foreign exchange market: "The market was built in such a way that NBU intervention was a necessary part of its functioning. And if the National Bank, as the main player, leaves, then the operation of the mechanism is disrupted. A new mechanism is being built, but no one has yet abolished the regulatory framework," explained S. Yaremenko. \n \nIn addition, according to him, strengthening the exchange rate of the national currency makes Ukraine attractive for the placement of "hot money," but on the whole worsens the investment climate. \n \n"The calculations of such investors were based on the fact that after a change of government in the country, order would be established, but the economy would remain stable and understandable in the long term. If, at the same time, this also changes, then the investor will stop and think about whether it is profitable for him to work under the new conditions. Far from in all cases will this decision be in favor of investing. In my view, such actions could be regarded as a bad signal and will lead to a deterioration of the investment climate," believes S. Yaremenko. \n \nIn his opinion, Ukraine needs to expand the toolkit for managing the process of investment by non-residents in domestic government bonds. \n \n"During a currency revaluation, the investor is prepared for a lower yield that the domestic market cannot handle, and then domestic banks are left without instruments for working with the central bank and regulating liquidity. Risks are also embedded here that need to be at least taken into account," noted the banker. \n \n