A strange phenomenon of the currencies of emerging countries against Corona

A report issued by the International Finance Institute said that while the emerging market currencies suffered a wave of losses against the US dollar last March, the movements of the Egyptian pound and the Turkish lira do not reflect the exchange policies announced by the central banks of the two countries, which are supposed to work with a free exchange rate regime the currency.

The report, which Al Arabiya viewed. A copy of it added: “We used our market pressure indicators to compare the movement of emerging market currencies, so it became clear to us that the currencies of Chile, Brazil, Hungary and Turkey were the most declining against the dollar last month, although the Turkish lira is with the pound. The Egyptian was one of the most declining currencies in the past month, given the large declines in foreign reserves in both countries.

The report continued, “This indicates the presence of the phenomenon of fear of floating in both countries, with limited movements on the currencies of the two countries in the midst of the stormy wave that hit the currencies of emerging markets.”

The term “fear of flotation” refers to the intervention of central banks in supporting their currencies, which are supposed to follow the free-floating system in what is termed “managed float”.

The exchange rate of the Egyptian pound against the dollar has stabilized over the past three weeks, around 15.68 pounds per dollar.

With the pound declining slightly against the dollar throughout March by only 1%, while the Egyptian Central Bank announced a sharp decline in foreign reserves of the most populous Arab country by about $ 5.4 billion last month.

In Turkey, the lira fell against the dollar by about 5%, according to Investing data, while the foreign reserves of the Turkish central bank fell by about two billion dollars last month.

“The data show that the pressures experienced by the currencies of Egypt and Turkey are the same as those experienced by the South African Rand and the Brazilian Real, but despite that the pace of their decline was lower,” the report added.

The report said the floating Mexican peso was the “cleanest” of emerging markets, in reference to the Mexican central bank allowing the currency to move freely against the US dollar.

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