Howestreet.com - the source for market opinions

ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

July 31, 2016 | Dollar Crisis in Egypt; Egyptian Pound Crashes on Black Market; Another Devaluation Likely

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

 

A collapse in the Egyptian pound is underway. The official pegged price says one US dollar buys 8.78 Egyptian pounds. The street price says one dollar buys 13 Egyptian pounds.

Egyptian Pound vs US$

Please consider Dollar Crisis Casts Shadow on Auto Sales in Egypt.

The automotive market in Egypt has been experiencing an unprecedented wave of price hikes due to a dollar crisis amid anticipation by analysts that the Egyptian pound would be further devaluated by the Central Bank.

Fluctuations in the exchange rate have cast shadow on the import sector, threatening a potential stagnation in the car market, as an acute hard currency shortage hampers trade in the import-dependent country.

“We closed our store over the past five days,” said Kareem Hussein, sales manager at Stars Auto store in downtown Cairo.

“The increase of the dollar’s exchange rate against the local currency caused stagnation in the sales and made the clients reluctant to conclude any deal,” he added.

The Egyptian pound weakened to a shocking rate of 13 against the U.S. dollar on the black market on Tuesday, at least 42 percent weaker than the Central Bank’s official rate of 8.78.

On Friday, the pound was trading at around 11 per dollar on the black market after a security crackdown had been launched on many exchange offices on Wednesday and Thursday.

The official banking system has been suffering from lack of “dollar resources” since the 2011 popular uprising, which led to the reluctance of foreign tourists and investments, the two main sources of hard currency.

Auto sales have declined by nearly 50 percent in July due to the unprecedented price hikes, Hussein said. Some 10 percent of the clients have withdrawn their deposits last week, he pointed out. “We live in a nightmare due to the dollar crisis,” he lamented.

The devaluation of pound has caused tremendous losses in the car sector and forced the merchants to increase the prices by 32 percent and made them looked like “exploiters.”

Not Enough Dollars

We see the same story once again: “There are not enough dollars to go around.” Mercy! Get out the printing presses.

Mike “Mish” Shedlock

STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio delivered to your inbox for FREE! Sign up here for the HoweStreet.com Weekly Recap.

July 31st, 2016

Posted In: Mish Talk

Post a Comment:

Your email address will not be published. Required fields are marked *

All Comments are moderated before appearing on the site

*
*

This site uses Akismet to reduce spam. Learn how your comment data is processed.