Home » Business » The pound fell twice in one day… officially to 24.73 and on the black market to 38 by Investing.com

The pound fell twice in one day… officially to 24.73 and on the black market to 38 by Investing.com

© Reuters.

Investing.com – The Egyptian pound saw another decline in the official foreign exchange market, dropping two piasters during trading on Wednesday amid strong expectations that an extraordinary meeting of the central bank will be held in the coming days.

The black market appears to be seeing a sharp rally ahead of next Friday’s International Monetary Fund meeting to finalize the fund’s loan signing. Rumors are spreading of a renewed devaluation of the Egyptian pound, after media reports indicated that the International Monetary Fund required access to a flexible and real exchange rate for Egypt to secure the first installment of a 750 millions.

Egypt had previously agreed with the International Monetary Fund to secure a $3 billion loan, and after a December 7 date was set for the final signing, the meeting was postponed until next Friday, December 16.

Modernization..

For the second time in one day, official exchange rates saw a move, as the dollar’s exchange rate rose by a new two piasters against the pound, bringing the total drop in the pound today to 4 piasters.

The Central Bank of Egypt’s exchange rate screen revealed that the dollar’s exchange rate against the pound had posted levels of £24.7347 in sells and levels of £24.6518 in buys.

In private banks, the dollar-to-pound exchange rate rose to £24.72 per dollar selling, and £24.69 per dollar buying, at Abu Dhabi Islamic, Egyptian Gulf, Commercial International, Mashreq Bank and Bank Med.

pound early

Today, Wednesday, exchange rates recorded a new decline in the National Banks by two piasters, to record the dollar exchange rate in the National Bank and Banque Misr, levels of 24.66 pounds sterling on sale and levels of 24, $61 sterling in purchase.

And in private banks, Commercial International, Al-Ahly Qatar National, Abu Dhabi Islamic, Al-Ahly Kuwaiti and Med Bank, the exchange rate jumped two points, to levels of 24.7 pounds per dollar on sale, and a price of 24.67 pounds per dollar to purchase.

According to the price screen of the Central Bank of Egypt, prices have not changed so far and are still at yesterday’s levels. After the update, the selling price will rise to 24.72 pounds per dollar, while the buying price will reach levels of 24.64 pounds per dollar.

Goldman Sachs forecasts

Goldman Sachs Bank (NYSE:) said that devaluation of the pound lower than necessary will not lead to the disappearance of the black market, while the devaluation, if it is higher than it is in the parallel market, will stimulate currency traders to sell the their proceeds to the official market, thus alleviating the supply crisis.

It also gives greater confidence and comfort to foreign investors and encourages capital inflows, but this is conditional on the existence of a reliable and tangible commitment that official supply remains sufficient to meet demand.

The bank expected the Egyptian authorities to likely move in the coming days to make a decisive decision, in the coming days and even ahead of the previously scheduled meeting on December 22.

He also expected Egypt’s central bank to raise interest rates by 1% at its next meeting on Dec. 22, but said there was a possibility to hold an extraordinary central bank meeting during the current week.

Eliminate the black market

US bank Goldman Sachs (NYSE:) said a continuation of the pound at current levels was unsustainable, but added that “another devaluation alone will not solve the problem.”

The bank added that the parallel foreign exchange market has always been a good measure of the extent of the foreign liquidity imbalance in countries that establish formal or informal capital controls, but this is not always the case.

He pointed out that in Egypt the real effective exchange rate – which measures the external purchasing power of the local currency – shows that the pound is undervalued.

At the same time, the parallel market price is rising sharply and registering around 36 pounds per dollar – at the time of writing the bank’s report – about 33% higher than the official price.

Goldman Sachs said in its report that in its view, the main factor behind this difference in the exchange rate is the lack of foreign currency liquidity in the monetary system.

black market price

Foreign exchange firm sources told Reuters that the black market has variable prices to the dollar, adding that there is already a market price of over £40 to the dollar, but said most of the trades that are made range between 33 and 38 pounds to the dollar.

And the Egyptian finance minister, Mohamed Maait, responded to the rumors about the dollar that reaches 40 pounds, saying: “Egypt is in a state of war, there are rumors from abroad”.

The Egyptian finance minister added that there is an “objective of the state and its stability” in the light of the crises that are affecting the world.

extraordinary meeting

BNP Paribas (EPA:) expects the Central Bank of Egypt to hold an extraordinary meeting before the International Monetary Fund discusses the Egyptian loan at a meeting on Dec. 16, according to a note issued by the bank.

There are two days left until the International Monetary Fund meeting on Egypt, and this means that if BNP Paribas’ expectations are true, the Central Bank of Egypt will meet this week.

Currency devaluation and interest increases

The French bank expected the Central Bank of Egypt to move more decisively towards floating the pound and raise interest rates by at least 2%.

The bank also anticipated in its memorandum that the IMF would approve the extended financing deal by the end of this year, but said the fund was, however, unlikely to disburse the first tranche, estimated at 750 million dollars, a Egypt ahead of the central bank takes decisive steps towards the flexible exchange rate.

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