NEWSLETTER
The exchange rate of the Egyptian pound against the US dollar fell to a new low on January 11 after touching 32.14 to the dollar. The last significant depreciation of the currency occurred only a few months after it adopted a flexible exchange rate regime. According to the International Monetary Fund, the Egyptian monetary authorities have pledged not to intervene in the foreign exchange markets.
Flexible Exchange Rate Regime
Just a few months after falling more than 15% against the US dollar, the Egyptian pound it reached a new low of more than 32 units per dollar on January 11. According to a Reuters report, the latest depreciation of the pound has led some analysts to question how far the central bank wants the pound to fall.
As Bitcoin.com News reported in October 2022, the official exchange rate of the pound against the dollar fell from just under 20 units per dollar to 23.09 per dollar after the Egyptian monetary authorities agreed to abandon the rate regime. fixed exchange rate In exchange, Cairo would receive a financial package of 3,000 million dollars from the International Monetary Fund (IMF).
Following the latest currency crash, some Egyptian analysts quoted in Reuters report he believed that the pound had reached its lower limit. Others, such as Goldman Sachs’ Farouk Soussa, said it was still difficult to conclude that the pound-dollar exchange rate had reached equilibrium.
“When portfolio investors start to come back, that’s when the market will have judged the balance. But there is no direct way to look at the balance,” Soussa said.
Monica Malik, an economist at Abu Dhabi Commercial Bank, said the latest drop in the pound alone does not guarantee that investors will return. The economist said that liquidating the accumulation of currencies could be a step that reassures investors. However, this requires new USD liquidity and, according to Malik, “there is currently no visibility where this liquidity will come from.”
Meanwhile, in the country of the IMF staff in Egypt report, the global lender revealed that the Cairo government had promised not to intervene in the currency markets. Under his agreement with the global lending institution, the Egyptian monetary authorities would only intervene in cases of excessive volatility.
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