Why has the Egyptian pound reached its highest level in two years?

DUBAI, United Arab Emirates (CNN) – The Egyptian pound hit its highest level in over two years against the US dollar on Monday, reaching an average price of 17.39 pounds at the central bank.

Mohammed Abu Pasha, vice president of research and macroeconomic analyst at EFG-Hermes, said the rise in the pound sterling was due to several factors, mainly foreign currency inflows into the Egyptian economy, which is ranged between $ 3 billion and $ 4 billion since the beginning of the year.

According to the Egyptian central bank, net international reserves were $ 44.06 billion at the end of February 2019.

Abubasha added that Egypt was able to offset about 50 percent of the decline in foreign investment in treasury bills during the second half of last year, which amounted to about 10 percent. billions of dollars. He pointed out that the rise of the Egyptian currency has occurred in the currencies of all emerging markets, although Egypt is one of the best, after divergent expectations of the continued rise in the interests of the economy. US Federal Reserve, which led to the low attractiveness of the dollar compared to other currencies.

Abubasha said the rise in the pound sterling against the dollar would mitigate the impact of rising fuel prices expected in Egypt with the start of the new fiscal year in July, albeit relatively.

For his part, Mohamed Al-Abyad, head of the division of brokerage firms, expressed optimism about the decline of the pound sterling against the US dollar, adding that, contrary to pessimistic forecasts, it could reach 17 pounds sterling due to declining demand for imported products and public awareness of Egyptian society. Economic reform of the Egyptian government, in partnership with the International Monetary Fund.

He pointed out that the decline in demand for cars, in response to popular campaigns that asked consumers not to buy them to pay their agents to reduce their prices, had a significant impact on the performance of the local currency.

Abubasha explained that the fluctuations of the Egyptian currency since the beginning of the year are mainly due to the cancellation of the mechanism of transfer of funds by the Central Bank to foreign investors, preventing these funds from entering directly on the market, which has further affected the pound sterling by foreign financial flows.

The Egyptian Central Bank has used this tool to reassure foreign investors that they could easily withdraw their money after the decision to place the pound sterling at the end of 2016 and throughout 2017 to increase the cost in early 2018. She would cancel it later in December after restoring confidence in the Egyptian economy. .