Floor Central bank of Egypt Allow the launch of new currency derivatives in order to free liquidity in the local market and provide hedging instruments against the risks to which it is exposed pound After that it dropped to a record high.
Under the plan, local banks will offer undeliverable local (pound) contracts called “NDFs”, as well as options that allow companies and new investors to bet on or hedge against fluctuations in the Egyptian currency, according to people with first-hand knowledge.
The goal is to build a more credible and transparent local market for forecasting currency movements, according to people who asked not to be identified because the information is not public.
The plan aims to provide local businesses with a way to protect themselves from large fluctuations in the pound if Egypt adopts a lower (official) exchange rate. So far, local banks in Egypt only adopt the spot exchange rate.
Interestingly, greater currency flexibility was a major issue in Egypt’s talks with the International Monetary Fund as it approached a deal. Egyptian officials will travel to Washington next week to attend the annual meetings of the International Monetary Fund and the World Bank.
Other details of the plan remain unclear. Central bank officials could not be reached for comment.
