Source: Cairo – Khaled Hosni
Despite the significant gains made by the Egyptian pound against the dollar since the beginning of last year until now, expectations indicate that this resilience will not last much in light of the currencies of emerging markets falling against the hard currency.
In a recent report, “Bloomberg” agency expected that the Egyptian pound will face an “inevitable decline” with the spread of “Covid-19”. The agency said that the Egyptian pound’s continued good performance amid the repercussions of the spread of the “Covid-19” virus, is in complete contradiction with the performance of the currencies of African markets, which have fallen sharply during the past month.
She pointed out that many investors believe that the value of the pound is exaggerated and that he will face an “inevitable decline” in the face of the dollar, despite its significant gains this year.
But at the same time, the Egyptian pound is the best performer this year after the Myanmar currency, as it managed to maintain its flexibility amid the displacement of funds from emerging markets during the past month due to the repercussions of the spread of the emerging virus.
With its gains of 2.1% facing the US dollar this year, many analysts turned to the advice not to invest in bonds denominated in pounds because the currency was no longer cheap.
As considered by “JP Morgan”, that the value of the pound has been exaggerated since mid-2019, with its continued rise against the dollar to the highest level in 3 years to reach 15.67 pounds to the dollar in mid-February.
The Egyptian pound is currently recording an exchange rate of 15.75 pounds against the dollar.
The central bank’s cut in interest rates could hurt the pound and similar measures have hurt the currencies of Ghana, Kenya and South Africa, which depend on the export of goods.
Analysts expect that lowering interest rates will reduce the demand for local assets initially in those countries, as will decisions of closings, factory closures and a decline in tourism affect the economies of these countries.
The pound rose by 13% in the face of the dollar between the beginning of 2019 and the end of February 2020. The rise was driven by investor appetite for debt instruments denominated in the local currency, Egyptians ‘remittances abroad and high tourism receipts, in addition to the decrease in companies and individuals’ appetite for the dollar since the beginning of 2017.