CAIRO: Following the initial results of the presidential election, the exchange rate gap between the Egyptian pound and U.S. dollar narrowed for the first time in two months Thursday, the Masrawy news site reported.
The purchasing power of the pound strengthened to 7.15 EGP to the dollar, and remained at 7.18 EGP to the dollar for selling, equal to its black market price in late January according to the National Bank of Egypt’s (NBE) daily bulletin.
In late March, the selling price of U.S. dollars rose from 6.99 EGP to 7.18 EGP.
In order to maintain the exchange rate between pounds and dollars, the Central Bank of Egypt (CBE) offers periodic dollar tenders, Masrawy reported. Starting in December, the CBE offered 200 tenders totaling $8.58 billion in addition to five exceptional dollar bids totaling $5.3 billion. In all, $13.88 billion was offered.
These tenders aimed to end the highly speculative black market for dollars and provide needed liquidity for importers of essential goods.
Ahmed Roshdy, the former head of NBE, told The Cairo Post he attributed the stabilization in the dollar exchange rate to expected stability following the presidential election and the tendering process.
“Political stability pushes foreign investors to invest at the currency market and to purchase the Egyptian pound,” Roshdy said. “This causes a state of sudden stability at the exchange markets.”
Roshdy added that increasing investments, promoting exports and jumpstarting the economy and tourism could help increase the value of the Egyptian pound even more against the U.S. dollar.
In response to the improved exchange rate, the CBE’s Monetary Policy Committee (MPC) decided Thursday to keep the overnight deposit rate, the overnight lending rate and the CBE main operational rate unchanged at their respective previous rates of 8.25 percent, 9.25 percent and 8.75 percent according to the CBE website.
Roshdy said that the CBE tends to maintain interest rates to avoid losing deposits in a state of decreasing interest rates and to avoid paying extra sums in a state of increasing interest prices.
Such a decline of interest rates could push depositors to withdraw their accounts to invest in other currencies like dollars and Euros, and that could negatively impact the exchange markets, Roshdy said.