Egyptian pound soars as dollar liquidity rises
The Egyptian pound strengthened slightly yesterday and importers reported increased dollar liquidity at banks days after the International Monetary Fund (IMF) approved a $12 billion loan the government hopes will jump-start the economy. Banks were selling the pound at around 15.7 to the dollar and buying it at around 15.2 compared with a sell price of around 16 and a buy price of around 15 on Sunday.
Egypt floated the pound on Nov. 3 in a dramatic move welcomed by businesses as the key to unlocking investment. It devalued the currency by about a third from the former peg of 8.8 against the dollar and allowed it to drift lower.
The pound initially fell to a rate of roughly 18 to the dollar, in line with prices quoted on the country’s currency black market just days before the float. The currency has been strengthening since last Wednesday, however, when IMF Managing Director Christine Lagarde said she would recommend the international lender approve Egypt’s lending program.
Monday’s stronger pound rate is in line with reports that importers of strategic goods are increasingly able to source their dollar needs from banks. One importer said he had been receiving his full currency requests on the same day, a dramatic improvement from the lengthy queues experienced before the float.
Moody’s said in a report yesterday that increasing dollars sales to banks was credit positive “because it increases the availability of US dollars to them, which, in turn, will help service their customers’ need for foreign currency, allow the banks to improve their dollar liquidity and reduce their net foreign liability position.”—REUTERS