The fluctuation of the Egyptian pound against the dollar.. Where is the exchange rate headed?

- The exchange rate of the dollar against the Egyptian pound has witnessed varying movements during the recent period, after it recorded record levels exceeding 56 pounds in late last October, before it declined by about two pounds, then rose again slightly in the most recent transactions, in light of the exchange market continuing to be affected by foreign capital flows, geopolitical developments, and the demand for foreign exchange. Last Sunday, the dollar recorded at the National Bank of Egypt about 54.17 pounds for purchase and 54.27 pounds for sale, compared to the highest level it reached last October 26, when it reached 56.22 pounds for purchase and 56.32 pounds for sale, reflecting a decline of about two pounds within 11 days, before transactions witnessed a limited rise again.

In this context, economic expert Walid Jaballah said that the exit of about $3.5 billion of foreign investments in government debt instruments within less than a week was the main reason behind the recent wave of the dollar’s ​​rise, explaining that these investments fall within foreign portfolio investments, which include foreign investors buying Egyptian treasury bills and bonds to benefit from the returns on them, and differ from foreign direct investment that tends to establish projects or expand productive activities. Badra added, in special statements to Ofoq News in Arabic, that the exit of foreign investors from debt instruments requires transferring funds from the Egyptian pound to the dollar, in preparation for transferring them abroad, which leads to an increase in demand for the American currency and pressure on the exchange rate of the pound. In his explanation of the decline of the dollar after the wave of appreciation, Gaballah indicated that the decline of fears related to the possibilities of Egypt’s participation in defending Saudi Arabia, following the approval of the House of Representatives, contributed to calming the markets, as well as the calm of the situation in the Gulf region and the decline of fears. The military escalation, along with the clarity of the nature of the participation as defensive, helped reduce the state of anxiety that affected investor movements and capital flows.

Regarding his expectations regarding the exchange rate, Djaballah said that it is not possible to say with certainty about a specific trend during the coming period, in light of the continuing state of uncertainty related to geopolitical tensions, oil prices, and the possibilities of renewed war in Iran, as well as the policies adopted by US President Donald Trump and the political understandings with the Democratic Party after his victory in the midterm elections in Congress. For his part, banking expert, Mohamed Badra, said that the return of short-term foreign investment flows to the Egyptian market, driven by the rise in returns on government debt instruments, contributed to an increase in the supply of the dollar, which was reflected in the decline in its price against the pound, explaining that exchange rate movements provided opportunities to achieve returns for investors, noting that portfolio investment flows were among the most influential factors in the rapid movements of the dollar price during the last period. Badra added in statements to Ofoq News in Arabic, that the levels of financial investments improved. Confidence and the lack of change in US interest rates, in addition to geopolitical developments, were among the factors that affected the movement of foreign capital and the exchange market. However, he expected the dollar to rise again, approaching the level of 55 pounds, driven by increased demand on the part of traders and importers to meet their foreign currency needs and open the necessary documentary credits for imports, as the end of the year approaches. He added that preparations for the Ramadan season may also contribute to increasing demand for the dollar, pointing out that these pressures may be seasonal. Temporary, and does not necessarily mean a radical shift in the direction of the exchange market, indicating that fluctuations in...Limits of 10% plus or minus around the level of 50 pounds do not necessarily represent a fundamental change in the market direction, stressing that the dollar price movements remain linked to developments in supply and demand and foreign exchange flows.