The Egyptian pound inched lower on Monday to its weakest in more than seven and a half years after the central bank released data on the country’s foreign reserves which some economists said showed an underlying weakness.
The pound ended at a weighted average of 6.1015 to the U.S. dollar on Monday, its lowest since Dec. 30, 2004. On Sunday it was last bid at 6.097.
EFG Hermes said in a note on Monday that the central bank seemed committed to a policy of allowing the pound to decline gradually.
The weakening indicated that “the central bank is moving relatively more aggressively than we expected … suggesting that our end-2013 forecast of EGP 6.40 may be realized earlier,” the note said.
EFG had now revised its forecast for the pound to fall to 6.25 to the dollar by the end of 2012 instead of its previous forecast of 6.10.
The central bank has spent more than $20 billion to support the pound since last year’s popular uprising chased away tourists and foreign investors, two of its main sources of foreign exchange.
Economists said higher foreign reserves included one-off items, such as a $500 million loan from Qatar and a 513 million euro-denominated treasury bill, that concealed a continuing drain on the country’s balance of payments.
The pound has lost less than 5 percent of its value against the dollar since the uprising that toppled Hosni Mubarak in February 2011.
Egypt last month formally requested a $4.8 billion loan from the International Monetary Fund to help it plug a balance of payments deficit worsened by the uprising.
Reuters
