“Egyptian Pound Rises 12% on Black Market as Dollar Demand Declines – Bloomberg Report”

Investing.com – The Egyptian pound rose 12% on Egypt’s local black market over the past week as demand for the dollar declined, Bloomberg reported Thursday evening.

This comes in conjunction with the Central Bank of Egypt’s decision yesterday regarding interest pricing, as it kept the interest rate at 18.25%, in the third meeting of the Monetary Policy Committee during 2023.

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The pound was trading at around 37 to the dollar on Thursday, compared to 42 last Friday, according to several traders. The people, who asked not to be identified, said the currency may extend its gains in the coming days, according to the agency.

They said that demand for the dollar abruptly fell, prompting traders to reduce activity. This is in light of the pound trading at 30.9 to the dollar through official channels through banks.

The Russian invasion of Ukraine severely affected the Egyptian economy, leading to large increases in food and fuel prices and causing a foreign currency shortage. The authorities have devalued the pound three times since the first quarter of 2022, helping secure a $3 billion deal with the International Monetary Fund.

The pound has already lost about half its value over the past year, and further declines are widely expected as the Egyptian government struggles to secure hard currency from foreign investors in the Gulf and beyond. The main question now, according to Bloomberg: When will that happen?

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In this context, Bank “Citigroup” and “BNP Paribas (EPA:)” said that the devaluation of the pound may occur at a later time than previously thought.

One of the factors in the decline in dollar demand was the country’s Association of Car Dealers, which called on its members to stop buying foreign currency on the parallel market.

Meanwhile, in the non-deliverable futures market, the one-month pound contract rose 2.4% to around 31.8 on Thursday, the highest since March 2, according to Bloomberg data.

The pound’s stability since March has raised some investors’ doubts about Egypt’s commitment to a flexible currency system. However, a senior International Monetary Fund official said this month that the government is “serious” about implementing a flexible rate, according to Bloomberg.

The IMF is waiting to see Egypt enact more of the wide-ranging reforms it has pledged – including real currency flexibility and privatization deals for state assets – before conducting the first review of the country’s programme, according to the agency.