Egypt devalues currency 14% after Ukraine war prompts dollar flight

Egypt devalues currency 14% after Ukraine war prompts dollar flight

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CAIRO: Egypt devalued its pound by 14% on Monday after Russia's invasion of Ukraine prompted foreign investors to pull billions of dollars out of Egyptian treasury markets, putting pressure on the currency.

The pound dropped to 18.17-18.27 against the dollar, Refinitiv data showed, after having traded at around 15.7 pounds to the dollar since November 2020.

The central bank also hiked overnight interest rates by 100 basis points in a surprise monetary policy meeting.

Egypt's central bank governor, Tarek Amer, told a press conference the pound had undergone a "correction" that reflected world and local developments. The correction would make exports competitive and help preserve foreign currency liquidity.

Egypt has been in discussions with the International Monetary Fund about possible assistance, people close to the negotiations have said, but it has not announced any formal request.

"This is a good move to make as the devaluation of the pound moves it roughly in line with its fair value and it could pave the way for a new IMF deal," said James Swanston of Capital Economics.

"However, it will be key whether policymakers now allow the pound to float more freely or continue to manage it and allow external imbalances to build up once more, possibly resulting