(Bloomberg) -- Egypt’s pound weakened past 50 per dollar for the first time since March’s devaluation, a closely watched milestone as the North African nation pledges to enact a flexible exchange rate.
The currency fell as low as 50.01 on the offshore market Thursday, before paring some of its losses. It’s the culmination of a streak of declines that started modestly in early October and deepened into November.
The pound is now trading at its lowest level since March 6, the same day authorities let it fall about 40% in a move that helped secure an expanded $8 billion deal with the International Monetary Fund. Egypt’s fourth devaluation since early 2022, it finally ended a grueling foreign-currency crunch.
“We attribute the weakness mostly to seasonality,” said Mohamed Abu Basha, head of research at Cairo-based investment bank EFG Hermes. “It’s end of the year, where the bias is always for some FX weakness as traders and economic agents settle some positions, in addition to a global backdrop of dollar strength.”
The dollar has risen since US President-elect Donald J. Trump secured his return to the White House, sending most emerging currencies lower amid resurgent trade-war risks. The Bloomberg Spot Dollar Index has risen more than 2% since Trump’s win in early November, although Egypt’s pound has declined about 1%.
A key component of the IMF deal is ensuring the value of the Egyptian currency more accurately reflects supply and demand.
The pound had seen long periods of stability since June, averaging about 48 per dollar, with an exception in August when it briefly edged past 49 amid a broader emerging market selloff.
The decline into November came after Egyptian banks were able to provide greenbacks more freely to clients. Lenders previously had to obtain central bank approval to sell foreign exchange to some sectors of the economy, including vehicle and furniture importers.
The latest depreciation comes as the IMF and Egypt discuss the government’s progress in meeting targets of the reform program. The Washington-based fund last month cited “substantial progress,” but said further talks are needed to complete the review, which would unlock a $1.3 billion loan tranche.
--With assistance from Kerim Karakaya.
(Updates with latest pound performance, background.)
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