Egyptian Pound Hits New Low Against US Dollar Despite Flexible Exchange Rate Regime CryptoGlobe

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The exchange rate of the Egyptian pound against the US dollar fell to a new low on January 11 after hitting 32.14 for a greenback. The last significant depreciation of the currency came just months after the adoption of 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 months after plunging more than 15% against the US dollar, the Egyptian pound hit a new low of more than 32 units per greenback on January 11. According to a Reuters report, the latest depreciation of the pound has prompted some analysts to wonder how much the central bank wants the pound to fall.

EGP/USD on January 15, 2023.

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 monetary authorities Egyptians have agreed to abandon the fixed exchange rate regime. In return, Cairo would receive a financial envelope of 3 billion dollars from the International Monetary Fund (IMF).

Following the currency’s latest tumble, some Egyptian analysts quoted in the Reuters report believed the pound had hit its lower bound. Others, such as Goldman Sachs’ Farouk Soussa, said it was still difficult to conclude that the pound’s exchange rate against the dollar had reached an equilibrium.

“When the portfolio investors start to come back, that’s when the market will have judged the balance. But there’s no direct way to observe the balance,” Soussa reportedly said.

Monica Malik, an economist at Abu Dhabi Commercial Bank, said the pound’s latest fall alone does not guarantee a return for investors. The economist said clearing the currency backlog could be a reassuring step for investors. However, this requires new USD liquidity and according to Malik “there is currently no visibility on where this liquidity is coming from”.

Meanwhile, in the IMF staff report on Egypt, the global lender revealed that the Cairo government had promised not to intervene in the foreign exchange markets. In accordance with its agreement with the global credit institution, the Egyptian monetary authorities would only intervene in the event of excessive volatility.

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Tags in this story Abu Dhabi Commercial Bank, Analysts, depreciation, Dollar, Egypt, Egyptian pound, Exchange rate, Farouk Soussa, Flexible exchange rate, IMF, International Monetary Fund, Investors, Monica Malik, pound, regime, US dollar

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Terence Zimwara

Terence Zimwara is an award-winning journalist, author and writer in Zimbabwe. He has written extensively on the economic issues of some African countries as well as how digital currencies can provide an escape route for Africans.

Image credits: Shutterstock, Pixabay, Wiki Commons

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