The fluctuation of the Egyptian pound against the dollar.. Where is the exchange rate headed?

The exchange rate of the dollar against the Egyptian pound has witnessed varying movements during the recent period, after it recorded record levels exceeding 56 pounds in late October, before it declined by about two pounds, and then rose again slightly in the latest transactions, in light of the exchange market continuing to be affected by foreign capital flows, geopolitical developments, and the demand for foreign exchange.

Last Sunday, the dollar recorded at the National Bank of Egypt about 54.17 pounds for purchase and 54.27 pounds for sale, compared to the highest level it reached last October 26, when it reached 56.22 pounds for purchase and 56.32 pounds for sale, reflecting a decline of about two pounds within 11 days, before transactions witnessed a limited rise again.

In this context, economic expert Walid Jaballah said that the exit of about $3.5 billion of foreign investments in government debt instruments within less than a week was the main reason behind the recent wave of the dollar’s ​​rise, explaining that these investments fall within foreign portfolio investments, which include foreign investors buying Egyptian treasury bills and bonds to benefit from the returns on them, and differ from foreign direct investment that tends to establish projects or expand productive activities.

Badra added, in special statements to CNN Arabic, that the exit of foreign investors from debt instruments requires transferring funds from the Egyptian pound to the dollar, in preparation for transferring them abroad, which leads to increased demand for the American currency and pressure on the pound’s exchange rate.

In his explanation of the decline of the dollar after the wave of appreciation, Gaballah pointed out that the decline of fears related to the possibilities of Egypt’s participation in defending Saudi Arabia, following the approval of the House of Representatives, contributed to calming the markets. Likewise, the calm of the situation in the Gulf region and the decline of fears of military escalation, in addition to the clarity of the nature of the participation as defensive, helped reduce the state of anxiety that affected investors’ movements and capital flows.

Regarding his expectations regarding the exchange rate, Djaballah said that it is not possible to say with certainty about a specific trend during the coming period, in light of the continuing state of uncertainty related to geopolitical tensions, oil prices, and the possibilities of renewed war in Iran, as well as the policies adopted by US President Donald Trump and the political understandings with the Democratic Party after his victory in the midterm elections in Congress.