Report: Egyptian Pound Reaches New Low Against US Dollar Despite Flexible Exchange Rate Regime

The change fee of the Egyptian pound versus the U.S. greenback fell to a brand new low on Jan. 11 after it tapped 32.14 per dollar. The forex’s newest important depreciation got here only a few months after it adopted a versatile change fee regime. According to the International Monetary Fund, the financial authorities in Egypt have pledged to not intervene in forex markets.

Flexible Exchange Rate Regime

Just just a few months after plunging by greater than 15% versus the U.S. greenback, the Egyptian pound tapped a brand new low of greater than 32 items per dollar on Jan. 11. According to a Reuters report, the pound’s newest depreciation has prompted some analysts to query the extent to which the central financial institution needs the pound to fall.

As reported by Bitcoin.com News in October 2022, the pound’s official change fee versus the greenback fell from just below 20 items per greenback to 23.09 per greenback after Egyptian financial authorities agreed to desert the mounted change fee regime. In return, Cairo would obtain a $3 billion monetary package deal from the International Monetary Fund (IMF).

Following the forex’s newest fall, some Egyptian analysts quoted within the Reuters report believed the pound had reached its decrease restrict. Others like Farouk Soussa of Goldman Sachs stated it’s nonetheless troublesome to conclude that the pound versus the greenback change fee had reached an equilibrium.

“When portfolio investors start to come back in, that is when the market will have judged equilibrium. But there is no direct way of observing equilibrium,” Soussa reportedly stated.

Monica Malik, an economist on the Abu Dhabi Commercial Bank stated the pound’s newest plunge alone doesn’t assure that buyers will return. The economist stated clearing the overseas change backlog could also be one step that reassures buyers. However, this requires new USD liquidity and in accordance with Malik “there is currently no visibility where this liquidity will come from.”

Meanwhile, within the IMF’s Egypt employees nation report, the worldwide lender revealed that the federal government in Cairo had promised to not intervene in forex markets. As per its settlement with the worldwide lending establishment, Egyptian financial authorities would solely intervene in circumstances of extreme volatility.

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