The US dollar stabilized versus the Egyptian pound yesterday at LE48.74 buying and LE48.84 for selling.
The green back has been trading at around LE48 since the Central Bank of Egypt (CBE) floated the pound on March 6. A stabilized foreign exchange rate boosts the investment environment and the local business climate in general.
Globally, China’s yuan inched higher against a softer dollar yesterday and looked set for the fifth straight weekly gain, its longest winning streak in more than three years.
The yuan was supported by stronger corporate interest in converting their foreign exchange receipts on the back of recent dollar weakness, but gains were capped by market caution ahead of Federal Reserve Chair Jerome Powell’s speech in Jackson Hole, Wyoming.
The yuan was trading 0.07% higher at 7.1428 to the dollar. If it retains all the gains into the late night close, it would have strengthened 0.23% against the dollar for the week, booking its longest weekly winning streak since May 2021.
“Yuan depreciation pressure has been alleviated as we have seen a general weakening of the dollar over the last month or two,” said Lynn Song, chief economist for Greater China at ING.
“The main reason for this is on the external side, as market expectations for Fed rate cuts have grown, and if the Fed cuts rates at a relatively fast pace, yield spreads should move to favour continued recovery of the yuan.”
Song expected policymakers to continue to keep currency stability as a high priority moving forward.
China’s central bank has been setting its daily official yuan midpoint fixing at levels firmer than market projections for more than a year, with traders and analysts widely interpreting it as an official attempt to keep the currency stable and supported.
Yen extends rally
Most Asian currencies firmed on Friday as a rebound in the dollar cooled before an upcoming address by Federal Reserve Chair Jerome Powell, where he is expected to provide more cues on interest rate cuts.
The Japanese yen was the best performer in Asia, extending a rally seen earlier this week after BOJ Governor Kazuo Ueda struck some hawkish notes during a parliamentary hearing. His comments also saw markets look past somewhat middling inflation data for July.
Broader Asian currencies advanced, but were set for a muted weekly performance as optimism over lower U.S. interest rates was offset by renewed concerns over slowing economic growth.
The Japanese yen firmed on Friday, with the USDJPY pair falling 0.4%. The pair was set to fall 1.3% this week.
The BOJ’s Ueda said that short-term interest rates were still too low, and needed to be brought up further to hit neutral levels. He also reiterated the bank’s recent messaging that it will raise interest rates further if inflation remains steady.
Ueda’s comments boosted the yen, which has been on a tear since the central bank hiked rates by 15 basis points in late-July. The prospect of higher rates presents more upside for the yen.
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