The US dollar lost 3.36 piasters of its value against the Egyptian pound on Tuesday, reaching an average of EGP 17.24 for buying and EGP 17.34 for selling, compared to EGP 17.28 for buying and EGP 17.38 for selling on Monday.
The official US dollar price in the Central Bank in Egypt lost between 3-4 piasters, reaching EGP 17.23 for buying and EGP 17.35 for selling, compared to EGP 17.26 for buying and EGP 17.39 for selling on Monday. This is considered the lowest US dollar price since March 2017.
Since the start of March, the US dollar lost more than 23 piasters of its value, and its losses were estimated to be 62 piasters since the downward trend started in January 2019, while its total losses were estimated to be 60 piasters since the beginning of 2019.
Bankers have attributed the drop in the US dollar price against the Egyptian pound to the increase in foreign exchange (FX) inflows in the Egyptian market, and the banking system since the start of this year.
The Chairperson of Banque Misr, Mohamed El Etreby, told Daily News Egypt that the total remittances of Egyptian expatriates in the bank reached $2.7bn in January and February alone.
The Vice Chairperson of the National Bank of Egypt (NBE), Yehia Aboul Fotouh, said that FX inflows in the bank reached $3bn in January and February, including remittances, waivers, investments of international funds in treasury bills and bonds, and export proceeds.
El Etreby pointed out that the drop in the US dollar price is due to the increase in inflows, alongside with the trust of international institutions in the economic reform programme, and the return of investment funds’ inflows in debt instruments.
Aboul Fotouh said that there are many positive indicators contributing to the drop in the dollar price, including confidence of global institutions in the strength of Egypt’s economy, and the praise of the International Monetary Fund (IMF) toward the economic reform programme.
Furthermore, Aboul Fotouh pointed out that FX inflows have seen a noticeable improvement since the start of the year in the light of the growth of the inflows of the tourism sector, and foreign investments in debt instruments.
January and February witnessed a significant increase in dollar inflows after $2bn entered the CBE as the value of the fifth tranche of the IMF loan, and $4bn bonds were sold by the ministry of finance in the international markets.
FX inflows also included $4bn from global funds to invest in securities and domestic debt instruments, as well as $4bn in FX waivers from clients.
The Minister of Finance, Mohamed Moeit, revealed in a previous statement that the foreign investments in T-Bills and T-Bonds reached $15.8m at the end of February.
Analysts attributed the rise in FX inflows to CBE’s decision to terminate the repatriation mechanism as of 4 December 2018, for any fresh foreign currency portfolio investments wishing to enter the local currency Egyptian T-Bills, T-Bonds market and the stocks listed on the Egyptian Stock Exchange,which guaranteed that investors who wished to sell their government securities could transfer money abroad in dollars.
The CBE abolished this mechanism on 4 December 2018, which took the foreign investment inflows in debt instruments to banks, hence, it increased liquidity in the interbank market and that left a direct impact on the exchange rate prices.
Tarek Metwally, a banking expert, said that abolishing that mechanism has contributed toward increasing the supply of dollars in banks, which activated dollar interbank between banks, and enhanced the Egyptian pound’s value against the dollar.
Metwally expected further drops in the price of the dollar in case FX inflows continued.
A survey conducted by EFG-Hermes to forecast the situation of the dollar against the pound revealed that 42% of the participants expect the dollar to reach EGP 18 by the end of 2019, while 13% expected a fall to EGP 16, and 7% predicted that the dollar will stand at EGP 20.
On the other hand, analysts told Daily News Egypt that the American currency may see a state of stability, as they emphasised that the dollar will only be moving within a limited range. Some expected the dollar to stand at a level between EGP 17.25 and EGP 19 until the end of the year.
According to the CBE, during 2018, the dollar price ranged between EGP 17.65 and EGP 17.85 for purchasing and between EGP 17.78 and EGP 17.97 for selling.
Mohamed Abdelaal, a board member of the Suez Canal Bank and the Arab Sudanese Bank, expects the US dollar price to stabilise at a level between EGP 17.25 and EGP 18.50 in 2019.
Abdelaal said that no pressures on the Egyptian pound are expected in 2019 due the elements causing the continued growth of the national economy and the stability in the FX reserves, in addition to no increases in import needs, and the success of the policy to liberalise the exchange rate since November 2016 until now, with the attractive interest rates on the pound, and expectations of further increases until the end of 2019.