After yesterday’s decisions by the Central Bank of Egypt and its moves to control the trend of the foreign exchange market, experts, analysts and investment banks have suggested that the market will tend to stabilize in the coming period, especially after the affiliated banks the government issued investment certificates with a high annual yield of 25%, as well as narrowing the gap between dollar exchange rates between the official and black markets.
Banks had already launched similar savings certificates last March, in coincided with the approval by the Central Bank of Egypt of the first significant increase in the dollar exchange rate during the extraordinary meeting held in March last year.
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These certificates, which have been available to customers for about two months, have been in capable of attracting deposits worth 750 billion pounds, on which the Central Bank of Egypt and the banks are betting in the issuance of the latest certificates.
It was not immediately clear whether Wednesday’s drop represented the expected transition to the floating exchange rate regime, said Mohamed Abu Basha, macroeconomic analyst senior by EFG-Hermes.
Abu Basha added, according to a report published by the Financial Times newspaper and viewed by Al Arabiya.net: “To judge this, we need to monitor the level at which the currency will eventually stabilize, and to what extent foreign exchange liquidity in banks will improve and whether in going forward we will see more volatility in the pound”.
Abu Basha said he would “wait and see” the liquidity level in foreign currency in the interbank market, according to Bloomberg.
“There is a lot of confusion now about whether we have a really flexible exchange rate regime,” said Farouk Sousse, an economist at Goldman Sachs Group in London. He added: “It has not been tested whether the pound will be more resilient in the face of external shocks in future and whether it will act as an automatic stabilizing factor for the external accounts”.
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He added: “If this will lead to a solution to the liquidity problems in foreign exchange facing Egypt will depend on whether we see large inflows of foreign exchange in the near term… The solution is to standardize exchange rates, which will require all foreign exchange applications to be completed.” demand piled up and unmet of future foreign currency,” according to Reuters.
Commenting on the recent decision to raise the exchange rate of the dollar against the Egyptian pound, Monica Malik, analyst senior of the Abu Dhabi Islamic Bank, told Bloomberg that it was a new cut and not a complete quotation of the Egyptian pound against the dollar, adding: “It results from the large difference between the official market price” and in parallel, which increased scarcity and lack of liquidity in foreign currency.
In conjunction with these steps; The Central Bank of Egypt continues to release the goods accumulated in Egyptian ports, especially after the end of work with the documentary credit mechanism since the beginning of quest’year. The value of imports that have flown out of Egyptian ports since early last December has risen to $6.8 billion, from $6 billion earlier this week, according to a recent statement by the Egyptian government. However, the filing did not reveal the value of the assets yet in suspended, while the government estimated it last week at around $9.5 billion on Dec. 25.
In his commentary, the economist, Hani Genena, predicted cash flows in dollars during the next 3 weeks, noting that the fair price of the dollar varies between 26 and 28 pounds. In his statements yesterday, he said that the timing of issuing a savings bond with an annual yield of about 25%, and therefore the movement of the dollar exchange rate, is a good step in the framework of the savings moves of the dollar in the official market.
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