The USD has rebounded against the EGP, in an attempt to claw back some of its losses after a few weeks of steady declines. The USD was changing hands at EGP 48.40-48.50 at state and private banks by the end of yesterday’s trading.

These fluctuations — whether upward or downward — are normal, driven by the use of FX flows to meet investor demand, as well as the usual volatility of hot money outflows from the country, two banking sources told EnterpriseAM.

It all comes down to supply and demand: This EGP-USD exchange rate is influenced by the balance of the supply and demand for the USD. When FX flows into the local market increases, the exchange rate tends to fall, while when investor demand for the greenback rises, the exchange rate tends to rise.

This rebound of the USD could be linked to the recent loosening of FX restrictions, which resulted in the use of USD surpluses to meet importers’ requests for production, our sources noted. Lifting restrictions on using credit cards abroad and the reduction of currency conversion fees also contributed to the greenback’s rise, sources added.

REFRESHER- Last week, several lenders slashed fees and loosened restrictions that were meant to dampen demand for foreign currency used by travelers and credit card users. The measures included letting customers consume as much as USD 10k for purchases outside of the country and decreasing the markup fees on FX transactions to 3% from 5%.

The USD-EGP exchange rate is expected to remain volatile, as the greenback is likely to recover its losses with the expected decline in seasonal tourism at the end of the month, according to our sources.

For more on the recent exchange rate moves, read our previous coverage here and here.

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