Tarek Amer, Chairman of National Bank of Egypt (NBE) and President of Egypt Banks Union, has commended the new system ‘FX Auctions’ applied Sunday by the country’s Central Bank for trading foreign currency through auctions to help preserve foreign fund reserves. He noted that the new system is the first major step to give more freedom to pricing of the national currency and to set its exchange rate more realistically.
“This system has given more freedom to pricing of foreign currency. Although it slightly increased the value of U.S. dollars against the Egyptian pound, it made pricing more accurate and the market more systematic,” Amer said.
He added that the auctions have made traders unable to excessively buy and store up foreign currency and restored stability and system to the market, noting that the new system benefits exporters who are happy with getting high-price foreign currency and also local businessmen who are happy with an organized foreign currency market.
The NBE Chairman said the US dollar has closed on Sunday at EGP 6.36, an increase of 0.36 pounds only which is actually less than 2%, pointing out that the increase is starting to slow down.
Amer further noted that the dollarization process has begun to shrink again after emerging during the previous days.
Moreover, Amer explained that it is not quite easy to predict the dollar’s exchange rates within the coming period whether it would go upturn or downturn as it depends on the supply and demand factor.
MENA quoted Amer by saying: “As pursuant to the new system, the banks as well as the market would generally set and maintain the dollar exchange rate on the basis of their needs. The speculators have nothing to do with such rate anymore.”
He further stated that the new system ‘FX Auctions’ is applied in many countries such as Mexico and Chile and has proven remarkable success managed to save huge reserves of the foreign currency.
Amer said that Egypt has to rationalize its imports of foreign currency, noting that in 2003 Egypt used to import 18 billion U.S. dollars per year and now it imports 60 billion U.S. dollars, which made the CBE interfere to control the market.
“After the new system took effect today, the NBE sold only five million U.S. dollars in Cairo and one million U.S. dollars in Alexandria, which means success of the new system introduced by the CBE,” Amer illustrated.
Amer concluded that such an organized foreign currency market through the successful new system will help attract foreign investors and will positively reflect on the Egyptian stock exchange market in particular and the economy in general.
