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Bankers see central bank behind surprise rise of Egyptian pound

Tuesday 29 January 2019 02:19 PM

The Central Bank of Egypt
The Central Bank of Egypt


 The Egyptian pound strengthened slightly against the U.S. dollar on Monday, after a nearly two percent rise on Sunday, and bankers attributed the increase to central bank intervention.

The pound was trading at 17.68 to the dollar at midday on Monday, up from 17.75 pounds on Sunday. The pound had previously traded at around 17.95 to the dollar.

On Sunday, the pound strengthened to as high as 17.6 to the dollar before stabilising at around 17.75.

Several bankers said they believed that the strengthening of the pound was a result of intervention by the central bank, which the bank has previously denied.

The central bank governor, Tarek Amer, did not respond to requests by Reuters for a comment.

“The strengthening of the Egyptian pound is worrying and orchestrated,” said one official at a private bank in Egypt. “It has nothing to do with supply and demand.”

The pound has not been this strong against the dollar since May 2018, according to Refinitiv data.

Last week, Amer told Bloomberg he expected to see a more volatile pound after Egypt ended a foreign exchange repatriation mechanism in December.

“Some fluctuations in local currency prices against the dollar were expected after ending the repatriation mechanism,” said Mohamed Abu Basha, EFG Hermes’ head of macroeconomic analysis. “We have seen large foreign inflows at the end of last week into the debt instruments market.”