Egyptian Pound Reaches New Low Against US Dollar Despite Flexible Exchange Rate Regime – Africa Bitcoin News
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The Egyptian pound against the US dollar fell to a new low on January 11, hitting 32.14 per dollar. The most recent significant depreciation of the currency occurred just a few months after the introduction of the flexible exchange rate system. According to the International Monetary Fund, the Egyptian monetary authorities have promised not to intervene in the foreign exchange market.
Flexible exchange rate system
Just a few months after the Egyptian pound had fallen more than 15% against the US dollar, on January 11 the Egyptian pound hit a new low of more than 32 units per dollar. According to a Reuters report, the pound’s latest weakening has led some analysts to question the extent to which the central bank wants the pound to fall.
As Bitcoin.com News reported in October 2022, the pound’s official exchange rate against the dollar fell from just under 20 units to $23.09 after Egyptian monetary authorities agreed to abandon the system of a fixed exchange rate regime. In return, Cairo would receive a $3 billion financial package from the International Monetary Fund (IMF).
After the currency’s latest decline, some Egyptian analysts quoted in the Reuters report believed the pound had bottomed out. Others, such as Farouk Soussa of Goldman Sachs, said it was still difficult to conclude that the pound-dollar exchange rate had reached equilibrium.
“When the portfolio investors start coming back, then the market has assessed the balance. But there is no direct way to observe the balance, Soussa said.
Monica Malik, an economist at Abu Dhabi Commercial Bank, said the pound’s latest fall alone would not guarantee a return for investors. The economist said that liquidating the foreign exchange reserves could be one step to reassure investors. However, this will require new USD liquidity, and according to Malik, “there is currently no visibility as to where that liquidity will come from.”
Meanwhile, in an IMF country report on Egypt, the global lender revealed that the government in Cairo had promised not to intervene in the foreign exchange market. According to an agreement with the global lender, Egypt’s monetary authorities would intervene only in the event of excessive volatility.
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