After authorities agreed to a flexible exchange rate as part of an International Monetary Fund support agreement, the Egyptian pound dropped about 4% to 24 against the dollar as trading resumed on Sunday, according to data from Refinitiv.
Following their promise of a ‘durably flexible’ exchange rate in conjunction with a staff-level agreement for a $3 billion IMF extended fund facility, the pound dropped about 14.5% to 23 against the dollar on Thursday.
Following two previous sharp devaluations in 2016 and this March, Egypt’s currency has been kept stable or allowed to decline only gradually. So far this year, it has lost ground to the dollar by about 34.5%.
JP Morgan stated in a note on Thursday that it thought the pound was fairly priced and predicted that it would gradually rise to 23.5 to the dollar by the end of the year.
The note stated that although ‘we view (Thursday’s) adjustment as sufficient to close most of the external imbalances,’ the USD/EGP ‘will continue to be under pressure in the coming days as it finds a clearing level.’
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