Increase in Egyptian pound's value surprises Cairo currency traders
A recent strengthening of the Egyptian pound against the US dollar is likely to be followed by a weakening of the pound in the coming months, experts say.
CAIRO — The US dollar registered its biggest decline in nine months against the Egyptian pound Jan. 27, falling by more than 0.20 pounds, or a little more than 1%. The drop in the dollar's value, which is expected to be temporary, surprised the Egyptian exchange market and caused many traders to suffer losses.
The pound's rise appears to be related to the Central Bank of Egypt's Dec. 4 termination of the foreign exchange repatriation mechanism, which guaranteed that foreign investors could convert investment earnings from Egyptian pounds back into their home currency.
The bank's governor, Tarek Amer, told Bloomberg on Jan. 22 that this means that Egypt can expect to see more fluctuations in the pound's exchange rate. “We will witness more volatility in the currency [since] the repatriation mechanism was shut down [for new investments], as investors will now have to go through the interbank market,” Amer said. The interbank market is a foreign exchange market common among all banks.
Amer reaffirmed Egypt’s commitment to keeping the market free, but added, “At the same time, we have reserves that help us to confront speculators or disorderly market practices.”
