04:22 PM
Wednesday 03 June 2020
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I wrote – Manal Al-Masry:
Bankers said that the rise in the price of the dollar during the past days, and its increase above the level of 16 pounds, is due to the increase in demand for imports, and the return of the path for foreign investors to exit from debt instruments, from emerging markets, including Egypt.
They added that this increase in demand for the dollar coincides with the decline in dollar flows to Egypt due to the negative economic implications of the spread of the Corona virus.
The Corona virus caused the decline in hard currency resources from tourism, remittances from Egyptians working abroad, exports, and the exit of indirect investments.
Today, the dollar exchange rate at banks is swallowed around 16.13 pounds for sale and 16.3 for purchase, according to the Central Bank data.
Bankers emphasized that the central bank’s supply and demand mechanism reflects with transparency the true value of the pound against the dollar.
Mohamed Abdel-Al, a board member of a private bank, said that the dollar increase was due to the lack of foreign exchange inflows from tourism, remittances from Egyptians working abroad, indirect investments, and exports due to the pandemic of the emerging Corona virus.
He added that there is a decrease in the supply of the dollar against the increase in the demand for import of production inputs and basic commodities, and the payment of interest payments on loans and maturities of international bonds, the time of their deadlines led to a decline in the pound.
Abdel-Al believes that the high dollar price reflects the credibility of the supply and demand mechanism and increases the confidence of foreign investors in the Egyptian market, in the absence of any intervention to control the price of the dollar.
He explained that the mechanism of supply and demand gives a clear picture to foreign investors about the true value of the pound against the rest of the foreign currencies, and that if the pound did not move against the dollar under these conditions, a negative image was issued in not following the free market policy in determining the exchange rate.
Abdel-Al expected that the dollar will range between 16 pounds to 16.5 pounds by the end of this year, and then decline again after expectations of an improvement in the global economy and the end of the Corona crisis.
An official in the Department of International Transactions and the Treasury in a private bank said that the return of foreign investors to exit from the Egyptian debt instruments in the middle of Ramadan within the wave of their exit from the emerging markets led to an increase in the demand for a dollar conversion, which caused its price to rise in light of the lack of dollar flows.
He pointed out that the lack of dollar flows, with the increase in demand for the exit of foreign investors, creates pressures on the pound, which is reflected in the increase in its price, especially after the central bank raised its hand to support the pound.
Rami Abu Al-Naja, Deputy Governor of the Central Bank, said in previous statements last month that about $ 17 billion in indirect investments from Egypt came out during the past March and April due to the global crisis of the fallout from Corona.
The source expected that the dollar will continue to rise slightly during the coming period to reach 16.25 pounds until the end of the wave of exit of indirect investments, and the recovery of the Egyptian economy.
The exodus of foreign investments from the Egyptian debt instruments contributed to the decline in the foreign exchange reserves in Egypt, which lost about 8.5 billion dollars in the past two months of March and April, falling to about 37 billion dollars.
The central bank said that it used these funds from the cash reserve to maintain the stability of the Egyptian markets and cover the country’s foreign exchange needs to ensure the import of strategic goods and the payment of foreign debts and cover the exit of some foreign investors from debt instruments, according to press data from the central bank.
An official source in one of the major public banks said that the increase in demand for import from the last week of Ramadan, and the reluctance of some customers to waive the dollar, created a demand for the dollar in exchange for a lack of dollar flows, which caused an increase in the price of the American currency.
He added that the requests for import are limited to importing production requirements, and basic commodities, from food commodities, medicines, or petroleum supplies.
He said that the rise in the price of the dollar is not worrying because it is a slight increase, but rather reflects the transparency of the mechanism of supply and demand followed by the central, after the liberalization of the exchange rate.
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