Egypt’s pound has rallied 12% on the local black market over the past week as demand for US dollars diminished.
(Bloomberg) — Egypt’s pound has rallied 12% on the local black market over the past week as demand for US dollars diminished.
The pound was changing hands at about 37 per dollar Thursday, compared with 42 last Friday, according to multiple traders. The currency may extend gains in the coming days, said the people who asked not to be identified.
The demand for the greenback suddenly weakened, leading the traders to reduce activity, they said. The pound trades at 30.9 per dollar on official channels via banks.
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Russia’s invasion of Ukraine hit the Egyptian economy hard, leading to major food and fuel-price increases and spurring its worst foreign-exchange shortage in years. Authorities have devalued the pound three times since the first quarter of 2022, which helped secure a $3 billion deal with the International Monetary Fund.
The pound has already lost around half its value over the past year, and more depreciation is widely expected as the government struggles to secure hard currency from foreign investors in the Gulf and beyond. The main question is how soon that will happen; Citigroup Inc. and BNP Paribas recently said another devaluation may be more distant than previously thought.
One factor in the reduced demand for dollars was the association of the nation’s car dealers calling on its members to stop buying from the parallel market.
Meanwhile, in the non-deliverable forwards market, the pound’s one-month contract gained 2.4% to around 31.8 Thursday, the strongest since March 2.
Read More: IMF Awaits More Egyptian Reforms Before First Review (1)
The pound’s stability since March has some investors questioning Egypt’s commitment to a flexible currency regime. A senior IMF official said this month that the government is “serious” about applying a flexible rate.
The Washington-based lender is waiting to see Egypt enact more of the wide-ranging reforms it pledged — including genuine flexibility in the currency and privatization deals for state assets — before carrying out the first review of the country’s program.
–With assistance from Netty Ismail.
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