As Egypt’s pound fell to a seven-year low yesterday (Monday), the investment bank EFG Hermes revised its forecast for the currency, projecting that it will fall to 6.25 to the dollar by December 2012.
Following the weekend’s release of Egypt’s foreign reserves numbers, and the economist commentary warning of what the foreign reserve hike implies, the value of the pound fell to 6.1015 to the US dollar on Monday September 3. The last time it was that low was December 30, 2004.
For more on Egypt’s economic troubles, see:
- Egypt Foreign Reserves Rise, Economists Still Concerned
- Egypt Central Bank Sells 513M Euro in T-Bills
- Are Islamists Introducing Economic Change?
Since then, EFG Hermes said that it would revise its expectation for the pound as Egypt’s Central Bank seems to be allowing the value of the currency to decline slowly, despite promises to the contrary.
While the IMF has suggested that Egypt devalue the pound as part of its economic recovery process, Morsi and his government refused to do so for fear of angering the populace. However, it seems now that Central Bank is allowing the currency to fall.
EFG said in a statement, “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.”
As for the end of 2012, EFG predicted that the pound would reach 6.25 to the dollar. Now, that amount has been revised to 6.10.
The Central Bank announced that foreign reserves had increased in August, but economists were quick to say that the reason for that rise was one-off events, not economic growth.