The dollar’s exchange rate fell below 52 Egyptian pounds on Tuesday before edging back up to close at 52.04 pounds at the National Bank of Egypt, after topping record levels over the previous two days and nearing 53 pounds.
The rebound offered some relief, but pressure on the currency remained as foreign investors continued to pull money from local debt markets and the government moved to contain the economic fallout from the war through austerity steps and limited social support.
Analysts attributed the pound’s rebound to remarks by the American president suggesting the war his country is waging with Israel against the Iranian regime could soon end, along with a package of measures the government announced Tuesday to confront the war’s fallout.
“The American president’s remarks about the war nearing an end strengthened market expectations that geopolitical tensions will ease in the coming period, in addition to the sudden drop in oil prices, which reduced pressure on markets,” Mohamed Abdel Aal, a board member at the Egyptian Gulf Bank, told Al Manassa.
Brent crude futures stood under $90 a barrel on Wednesday morning after nearing $119 in Monday trading, following remarks by United States President Donald Trump that the war would end soon, though not this week.
Mustafa Shafie, head of financial research at Acumen Asset Management, also told Al Manassa that the pound’s recovery Tuesday reflected the volatility of the dollar against global currencies in recent days.
Globally, the dollar posted a notable rise last week as investors fled to it as a safe haven from war risks, but Trump’s latest remarks trimmed some of those gains during Tuesday’s trading.
Still, Egyptian Exchange data showed foreign investors were continuing to pull heavily out of government debt instruments, ending their treasury-bill trading on the exchange as net sellers of 60.9 billion Egyptian pounds ($1.17 billion), the highest sales over the past two weeks, which have been dominated by the war.
At a press conference with cabinet ministers on Tuesday, Prime Minister Mostafa Madbouly said the government was working with the Central Bank to secure foreign-currency resources to support the country’s needs.
Finance Minister Ahmed Kouchouk defended the fuel price increases announced by the Petroleum Ministry early Tuesday, saying the government had adopted austerity policies to curb unnecessary spending in order to secure the country’s basic needs because of the war.
Shafie said those measures had sent positive signals to the markets and helped support the pound.
Madbouly also asked citizens to excuse the government for the exceptional measures it had taken because of the war, most notably fuel price increases of as much as 17%, and announced a two-month extension of a cash grant worth 400 Egyptian pounds ($7.70). The government had previously announced that the payments would be made in March and April to ration-card holders and people enrolled in the Takaful and Karama welfare program.
“We ask citizens to excuse us for taking some measures the government did not intend to implement under normal circumstances,” Madbouly said. “Under the current conditions, we had no alternative.”
Petroleum and Mineral Resources Minister Karim Badawi said that despite the increase in petroleum-product prices, the state was still bearing about 30 billion Egyptian pounds ($580 million) in subsidies for butane cylinders, in addition to substantial subsidies for diesel and gasoline even after the latest price increase.
Supply Minister Sherif Farouk warned unsubsidized bakeries during the conference against sharply raising prices because of higher energy costs. Khaled Sabry, spokesperson for the general bakeries division at the Federation of Egyptian Chambers of Commerce, said prices for unsubsidized bread would rise by between 25% and 30% in the coming period because of current inflationary pressures.
Sabry told Al Manassa that “the small loaf sold for about 1.50 pounds (3 cents) may rise to 2 pounds (4 cents), while the loaf sold for 2 pounds could rise to 2.5 pounds (5 cents) after the expected increases take effect.”
Sabry added that bakeries had previously resorted to reducing loaf weight instead of raising prices, but weights had already reached the minimum, with some fino bread (sandwich rolls) weighing only about 25 grams, making any further reduction difficult.
