dollar hits 9-month low against local currency

Egypt Independent

7 days ago

The US dollar has fallen to its lowest level in Egypt in nine months, reaching LE 48.75 for buying and LE48.85 for selling per dollar.
Bankers attribute this continued decline of the dollar against the Egyptian pound to an increased supply of foreign currency during the summer season, outstripping demand, especially following the unification of the exchange rate market.
Typically, during the summer months of July, August, and September, foreign currency inflows rebound significantly. This is largely due to the start of the Gulf tourism season and the return of Egyptian expatriates for their family vacations, which boosts foreign currency receipts.
Remittances from Egyptian expatriates represent the second-largest official source of foreign currency after export revenues. The increased circulation of foreign currency in banks and exchange offices further strengthens the pound against the dollar.
According to Central Bank data, remittances from Egyptians working abroad jumped by 69.6 percent during the first 11 months of the 2024-2025 fiscal year, reaching $32.8 billion.
Furthermore, the Central Bank's maintenance of a stable exchange rate for the pound has strongly encouraged foreign investors to return to the local currency. They are selling dollars and buying pounds to capitalize on the high returns. The banks' ability to provide dollars to foreign investors when they wish to transfer a portion of their treasury bill investments out of Egypt has also significantly boosted confidence and encouraged their renewed participation.
Economist and energy markets expert, Wafaa Ali, stated to RT that there is little doubt the current scenario indicates the Egyptian pound is moving beyond conflicting interests and experiencing a recovery not seen in eight months.
The Egyptian pound has broken free from the pressures exerted by geopolitical tensions and their impact on the economic agenda. It has maintained exchange rate flexibility, and foreign exchange systems have been freed from 'mutations' to avoid the accumulation of external imbalances, bringing the Egyptian pound back into the spotlight.
Ali elaborated that the increase in foreign currency reserves, which signifies the economic state and provides definitive proof of recovery, is driven by several factors.
These include increased investment flows, remittances from Egyptians abroad, robust tourism revenues, and a revival in real estate purchases by Gulf citizens. Additionally, the downward trend in inflation over the past month has positively impacted the exchange rate, causing it to drop by 15-18 piasters within 24 hours, pushing it below the LE50 mark per dollar.
She added: 'Based on the foregoing, the Central Bank's flexible policy, cash flows, and the growth of the banking sector's foreign assets—which have turned from negative to a net positive of approximately $14 billion—have improved tourism revenues and non-oil exports.
It is worth noting that the current level of the currency allows Egypt to capitalize on investment opportunities in the upcoming phase, which moves the Egyptian pound away from the target of futures contracts and allows it to continue its gradual improvement.'
Economist Mohamed Anis, speaking to RT, attributes the Egyptian pound's appreciation against the dollar to several factors.
First, he noted the calm in geo-strategic risks, citing the frozen Gaza conflict that hasn't escalated into a regional war, and the contained Iranian-Israeli conflict, preventing an impact on the prices of Egypt's major foreign imports like petroleum derivatives and wheat.
Secondly, Anis highlighted the surge in dollar inflows into the Egyptian market. He explained that the Egyptian pound's interest rate remains high at 25 percent, compared to an inflation rate of around 15 percent.
This creates a significant real interest rate of approximately nine percent, attracting indirect investments into Egyptian government bonds.
Third, he referred to the increase in natural dollar inflows, such as remittances from Egyptians abroad, tourism revenues, and exports. These combined factors have led to a relative and temporary rise in the pound's value against the dollar.
Anis concluded by stating that the fair exchange rate for the pound against the dollar should be between LE49 and LE52 by the end of 2025.