CAIRO: The Egyptian pound hits its official lowest level after the Central Bank of Egypt (CBE) has let it depreciates to 7.39 to a U.S. dollar at a regular Thursday auction, compared to 7.34 a day earlier.
This is the lowest level the local currency has been allowed to hit since the central bank began its auction in December 2012 and it is also the 5th depreciation this week, amid expectation of extended slip in the coming days.
“The bank offered $40 million and sold 38.4 million at a cutoff price of 7.39 EGP per dollar,” the central bank said on its website Thursday.
The bank’s move to let the Egyptian pound depreciate, which started Sunday, came shortly after its Monetary Policy Committee (MPC) decided to cut key interest rates by 50 basis points last week.
“The dollar was sold at 7.80 EGP on the black market Thursday, down from 7.85 a day earlier,” a trader told Youm7. The decline was mainly driven from CBE FX auctions this week, another trader told The Cairo Post, expecting further slip during the coming period.
Economist and financial analyst Hany Tawfik welcomed the bank’s “delayed decision” to depreciate the local currency against the dollar, calling on the CBE to adopt a “controlled” local currency floating policy until having enough foreign reserve to let the “supply and demand concept” determines the real value of the Egyptian pound.
Tawfik, who heads the Egyptian Private Equity Association, told The Cairo Post: “As the Economic Summit approaches, the Central Bank should explain in an official statement the reasons behind his latest step to assure foreign investors that Egypt is adopting a flexible foreign exchange policy.”
Importers will suffer from sharp depreciation of local currency, but local industry will boom eventually as importers will have to depend more on home produced raw materials instead of importing, he said.
Egypt’s exports, tourism and FDI will deliver a boost from the pound depreciation, said Tawfik, who expected “a leap in structural reforms in the coming period.”