Nearly $1 Billion Poured Into Egypt’s Forex Market — Local Currency Now World’s Worst Performing Currency in 2023
The Egyptian central bank recently claimed that its decision to devalue the local currency has been vindicated by foreign investors’ return to the country’s foreign market where they reportedly poured in $925 million in just three days. The surge in the sales of Egyptian treasury bills that mature in a year or less similarly is said to vindicate the central bank’s devaluation of the pound.
Surge in Treasury Bill Sales
Foreign investors reportedly moved $925 million into Egypt’s foreign exchange market just days after the local currency’s exchange rate versus hard currencies sharply declined. In addition, the country’s forex market has also received inflows from the so-called local sources as well as from Egyptians working abroad.
According to a Reuters report based on the Central Bank of Egypt (CBE)’s Jan. 16 statement, just three days after the Egyptian pound’s devaluation on Jan. 11, Egyptian banks were able to fulfill importers’ requests for forex amounting to $2 billion. In its Arabic language statement, the CBE reportedly said the return of foreign investors, which is also evidenced by the surge in the sale of Egyptian treasury bills, vindicates its decision to switch from a fixed to a flexible exchange rate regime.
As recently reported by Bitcoin.com News, the Egyptian pound briefly fell to an all-time low of 32.14 units of the local currency for every dollar. By allowing the pound to depreciate by more than 16% in just under a year, the CBE met a key International Monetary Fund demand. Satisfying this demand allowed the IMF to approve Egypt’s $3 billion loan package.
Meanwhile, a Bloomberg report said Egypt’s net international reserves had risen despite the debt repayment of $2.5 billion that was made in late 2022. To help Egyptians counter the effects of rising inflation, local banks are now reportedly selling currency derivatives, the CBE said.
Since plunging to an all-time low of 32.14 per dollar, the Egyptian pound has marginally recovered and at the time of writing, it trades at around 29.57 per dollar on Jan. 17 (16:32 EST).
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