Egypt Independent

Experts predict stable exchange rate for US dollar in second half of 2017

Some investment experts are predicting that the Egyptian pound will regain some strength against the US dollar during the second half of 2017, bringing the average US dollar exchange rate to between LE14-LE15, compared to a rate of LE18-LE20 recorded by the end December.

The governor of the Central Bank of Egypt (CBE) Tarek Amer devaluated the Egyptian pound on November 3 as part of a package of economic reforms expected to contribute in attracting more foreign investment and improve economic growth rates.

Radwa El-Swaify, head of research at Pharos Holding, confirmed in a research note, that the US dollar is the biggest winner in 2016; however, she believes that its rate of exchange against the Egyptian pound will stabilize and the later may rise when the supply and demand fundamentals return to their normal levels.

She added that there is an exaggerated demand at the present time, due to the accumulated demand since the currency crisis in early 2016; as well as the transfer of profits of some foreign investors in Egypt abroad.

Others however, refused to transfer the profits on the basis of an exaggerated exchange rate.

In addition, there was an increased demand for US dollars from importers of raw materials, who attempted to create a stockpile of materials to control their costs and adjust the pricing of their products.

On the other hand, we find a decline in the US dollar supply in light of the weakness of foreign direct investment, foreign investment portfolios, tourism, net exports and Egyptian remittances.

Swaify added that it would be surprising if the Egyptian pound continued its gradual weakness until the first half of 2017, after which she expects the trend to begin to reverse and the pound to regain some of its strength gradually against the US dollar, until it reaches between LE14-LE15 again.

Senior Economist at Arqaam Capital Reham al-Desouky told Al-Masry Al-Youm that no one can predict with accuracy the exact exchange rate that the US dollar can reach at the present time and until the end of the year, given the strong rise in demand for foreign currency.

Desouky added that there are wide requests from foreign companies operating in Egypt to transfer their profits abroad with the dates approaching for closure of their budgets; while banks are trying to keep one step ahead or at least on the same line with the black market, to ensure that banks are the destination of US dollar holders, especially individuals.

She said that the retreat of the US dollar and the strength of the pound, is currently tied to wide financial inflows from investors, especially on Treasury Bills and shares of the stock market, after New Year's eve; as well as the government initiating listing shares in state-owned bank and companies on the stock market, and these flows will have a rapid impact in calming the situation and reducing the dollar exchange rates.

Desouky predicted that the average currency exchange rate for US dollar by the end of the first half of 2017 would be between LE14-LE15, and it may continue decling in the second half of the new year to reach an average of LE13.