Here's how the latest US rate hike will impact Egypt's economy
A stronger US dollar will inevitably drive higher import costs, and subsequently prices, in the most populous Arab country, yet could eventually provide a boost to the local currency with an increase in exports.
Spearheaded by a hawkish Federal Reserve policy, the US dollar is rallying across the board versus world currencies. The greenback has posted gains against major currencies, including the euro, yuan and yen, since the Fed raised interest rates by 0.75% on July 27. The Egyptian pound has been no exception, with the US currency currently hovering above 19.15, the highest since December 2016.
However, the recent gains of the greenback are logical due to the demand/supply equation, as one economist told Al-Monitor.
“Demand for the dollar has increased, while supply declined on the back of falling revenues from tourism. However, the 0.19-pound increase in the dollar exchange rate is insignificant and is not a worrisome issue. As a percentage, it roughly stands at 0.8%,” Rashad Abdo, head of the Egyptian Forum for Economic and Strategic Studies, told Al-Monitor.
The dollar rose from 18.96 pounds on July 28 to 19.16 on Aug. 6, gaining roughly 0.19 pounds over a week. However, Abdo warned that the cost of imports would increase.
