The Egyptian pound has been gaining momentum against the US dollar over the last two weeks, hitting a new high earlier this week. On Monday, the dollar was selling at LE7.1 to the pound on the parallel market, compared to its official price of LE7.03 at Egyptian banks. Trading at LE7.65 on the black market at the beginning of this month, the dollar reached LE7.25 last week after the announcement of a financial aid package to Egypt from Saudi Arabia, the United Arab Emirates and Kuwait totalling $12 billion. The Central Bank of Egypt (CBE) said on Sunday that it had already received $5 billion of this package, pushing up the reserves to $20 billion, their highest level in a year and compared to $14.9 billion in June. The reserves have been decreasing since 25 January 2011, when they were estimated at $36 billion, as a result of the unrest that has affected the performance of Egypt's main foreign currencies earners like tourism and exports. The US currency's rate on the black market started to take a downward trend after 3 July, when the former president, Mohamed Morsi, was ousted following mass demonstrations. “Holders of the dollar started selling instead of hoarding for fear of a spiralling decrease in its rate on the back of receiving the Gulf financial aid,” said Mohamed Al-Abiad, head of the exchange division at the Federation of Egyptian Chambers of Commerce. Demand for the dollar was now at its weakest in months, he added. Ezzat Abu Zeid, manager of the Brent Exchange Company, said that there had been a “huge” dollar purchasing frenzy during the countdown to the 30 June rallies and until 3 July when Morsi was ousted, but now the situation had reversed. Abu Zeid told the Weekly that he expected the dollar rate offered by the exchange companies, which hovers around LE7.1, to continue to depreciate because of the lack of demand and the abundance of supply. He added that any financial aid that Egypt receives will help increase the CBE's reserves of foreign currencies and dollar liquidity in the market. However, Al-Abiad said that the financial grants and aid to Egypt would not necessarily lead to a cap on the price of the dollar, though they would help stabilise dollar rates and prevent the sudden increases that happened in the last fiscal year. The dollar went up from LE6.05 in June 2012 to its current value of LE7.03 in official banking transactions. Al-Abiad also stated that he believed the black market would substantially disappear by the end of the year, backed by the expected stability in the foreign reserves and a continuous decline in demand for the US currency, as well as the absence of dollarisation. Government officials previously announced that Egypt's merchandise import cover had reached the three-month mark, with foreign currency reserves of $14.9 billion. The financial aid packages from the Gulf states will increase that period to over five months and will encourage credit-rating agencies to upgrade Egypt's rating in the near future, which will help attract more foreign investments, they said. The value of the Egyptian pound slightly improved against other currencies as well on Monday, trading at LE9.49 to the euro and LE11.03 to sterling, up from LE9.59 and LE11.2, respectively, at the beginning of this month.
