CAIRO: The Egyptian pound fell to its weakest level in five months, prompting concerns that the troubled global economy could lead the pound to falter further by the year’s end.
In an effort to staunch the bleeding, the Central Bank this week reaffirmed the regulations that manage currency exchange in the hopes that shoring up these practices could stabilize the currency.
These practices are largely centered on handling currency exchange for the withdrawal of assets from the Egyptian Stock Exchange.
The policies that the Central Bank is attempting to reassert were first implemented in December 2004.
With the renewal of these policies, the Central Bank is seeking to exert control at a time when Wall Street teeters on the brink of disaster and many investors are eager to withdraw from the markets.
Heavy pullout from the Egyptian markets over the past several days has officials concerned about the banking system’s ability to keep up with currency conversion.
“The foreign exchange interbank market had witnessed increased activity over the past two days to accommodate foreign investors’ requests to exit the Egyptian Stock Exchange, wrote Reham ElDesoki, senior economist at investment bank Beltone Financial.
The foreign exchange interbank system was intended to create a domestic interbank loan system whereby banks would be able to make short-term loans to one another.
The system’s founding premise was that banks with excess cash could facilitate those with less in order to alleviate pressure that would otherwise be placed on the exchange rate.
In its latest move, the Central Bank, as part of an effort to instill confidence in foreign investors, guaranteed the continued solvency of foreign exchange.
The current exchange rate stands around LE 5.44 to the US dollar.
The faltering pound has weakened substantially in the last month alone. In August it was valued at LE 5.29 to the US dollar.
Some analysts see the currency continuing to weaken through the end of the year.
“Given the absence of major investment deals and the increased demand for foreign currency for domestic business purposes, wrote ElDesoki, “we expect the pound could continue to slide to 5.50/USD by the end of the year.
