EFG-Hermes on Sunday projected the US dollar exchange rate to further decline to LE14.5 over the next few weeks.
Ahmed Shams el-Din, head of research at EFG-Hermes, said Sunday that he expects the US dollar exchange rate to stabilize at levels between LE15 and LE17 during the current year, in statements made to MENA news agency.
Shams el-Din ruled out that the US dollar will return to the high levels recorded during the past weeks, when the US currency broke the LE20 mark.
He added that the liquidity of foreign exchange rates increased dramatically after the decision to liberate the US dollar exchange rate, which he described as ''the focal point for the recovery of the Egyptian economy.''
According to Shams el-Din, the banks received flows of foreign exchange amounting to US$12.3 billion since the flotation of the pound on November 3, 2016; as well as the return of Egyptian expatriates' remittances to the legitimate channel to transfer money through banks, having been attracted previously by the black market for a long time.
Shams el-Din said that the numbers of foreign investors willing to transfer their profits and capital abroad are decreasing. He expects investment and capital inflows to the Egyptian market, whether in the stock market or debt instruments such as treasury bills, to improve in the near future and this will further strengthen the Egyptian pound.
He pointed out that the pound will reach a fair value, set by the government in its agreement with the International Monetary Fund (IMF), but that this will take some time, expecting the US dollar to fall in the coming years to settle trading at fair value rates. This is to be expected after the end of the state of shock that usually occurs after the flotation of the local currency in any country, which leads to record exaggerated price hikes, and instability in the foreign exchange market for some time.
Shams el-Din said that with expectations for an increase of investment inflows to Egypt over the next three years; the return of tourism; along with petroleum discoveries; the start of new gas fields production; improved quality of Egyptian products as sufficient substitutes for imports; and increased remittances from Egyptians living abroad; the dollar will fall to rates lower than the current rates.
He added that the liberation of the exchange rate is a decision basically aimed at attracting foreign investments, and the elimination of the two prices for foreign currencies in the Egyptian market, which irked investors and prevented them from investing in Egypt.
Shams el-Din noted that the entry of "hot money" into the Egyptian market, both in debt instruments or the stock market is normal after floating the currency. This is not a defect, and the government has to take further action and enact legislation to convert this hot money into long-term investments in all sectors, especially given enhanced exchange rate stability.
