Analysts said that the dollar is expected to remain in the EGP16 vicinity within a short-term period, making this the lowest level reached by the dollar against the pound since November 2016.
The dollar’s decline against the pound started two weeks ago, in which the former lost more than EGP 3 from the highest level reached post pound-flotation.
The dollar continued its decline in the Central Bank of Egypt (CBE) on Sunday, so its official price registered EGP 15.735 for purchase and EGP 15.867 for selling, a decline of EGP 0.35 on Thursday.
While in banks, the dollar was traded at EGP 15.7 and EGP 15.95 for purchasing, and EGP 15.8 and EGP 16.05 for sale.
According to Tamer Youssef, head of treasury sector at one of the foreign banks operating in the domestic market, it is highly expected that the dollar price will remain at the level of EGP 16 over the next three weeks at least and that the price of the pound against the dollar will reach equilibrium in the fourth quarter of 2017.
Youssef explained that this balance will be achieved with the continued implementation of the economic restructuring programme, which will lead to reducing imports, controlling the balance of payments, increasing direct and indirect foreign flows to the Egyptian market, improving market risks, and lifting the credit rating of Egypt.
According to Youssef, it is expected that the dollar price will move against the pound throughout all of 2017 to a range from EGP 16 to EGP 18, where, by the end of the year, it will have reached EGP 16.5 or EGP 17.
According to Nour El-Din Mohamed, head of Target Investments Financial Consultancy and Asset Management, said that he expects the Egyptian pound to witness successive waves of increases against all currencies over the upcoming period. He expected the dollar to reach EGP 16 in March or earlier, while it is expected to fall to the level of EGP 12 to EGP 13.50 by the end of June.
Mohamed explained that these expectations are based on several factors, first of which is the steady increase of foreign direct investments (FDIs). Second, there has been a strong demand on local debt instruments, such as treasury bonds and bills, by foreign investors. Third, there has been an increase in foreign reserves in the Central Bank of Egypt (CBE). Fourth, Egypt has gradually seen a steady increase in tourism. Fifth, the starting of production in the Zohr field has also been a contributing factor. Last has been the emergence of many local alternative products for imported products.
“With the large demand on debt instruments from foreign investors, there will be a major decline in interest rates, which is expected to reach 16% on all dues; this will turn us from the situation of the inverted yield curve to a flat yield curve, then return rates will decline on treasury bills to range between 12% and 14%, bringing the yield curve to normal by the end of the year,” said Mohamed.
Mohamed expected the prices of goods and services to decrease significantly over the upcoming period because of the decline in the dollar rate and the increase in its supply domestically. This will be followed by a great decline in inflation, according to Mohamed. He noted that inflation rates will return to the level of 12% by the end of this year.