Jan 21, 11:46 AM EST

Egypt currency falls to historic low, could spur investment

World Video

Latest News
4,300-year-old pyramid discovered in Egypt
Women join fight against female circumcision
Cheap electronics threaten Egyptian repairmen
Egyptian women rally to denounce killing of female protester

Egypt court upholds verdict against 3 prominent activists

Egypt state newspaper calls out president following shooting

Protester shot dead at leftist party march in central Cairo

Expert says King Tut mask can be restored after epoxy used

Buy AP Photo Reprints
A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
Almost half of US households exhaust their salaries

German unemployment up to 7 pct in Jan amid seasonal factors

Philippines: Growth shows we're no longer sick man of Asia

Russian government details spending cuts in view of crisis

NYC economy lost $200M from fizzled storm, transit shutdown

Britain's economy loses steam in fourth quarter

As storm rushes in, airlines cancel while salt sellers gain

France, seeking growth, debates bill to free up labor rules

German business confidence rises for third month running

Afghan economic crisis looms as foreign aid dollars depart

Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt

CAIRO (AP) -- Egypt's currency fell for the fourth time in a week on Wednesday, hitting its lowest point ever against the dollar, in a development that could help boost foreign investment after four years of unrest.

The central bank set a cutoff rate of 7.34 Egyptian pounds per dollar in an auction that sold $38.4 million, compared to a rate of 7.29 a day earlier. Before this week, the exchange rate had not changed for six months.

Investors and economists see the currency as overvalued and local demand for dollars has fueled a thriving black market. On Wednesday, traders were buying dollars at rates of 7.80 to 7.94 pounds.

"Almost all other currencies in the world had weakened against the dollar over the past six months," said Simon Kitchen, a strategist at Egypt's EFG Hermes bank. "It was surprising that Egypt had not let its currency move. This is sort of catching up, I suppose to some extent, with the rest of the world."

"I think it's a sign that the central bank is trying to eliminate the black market," he said, a move investors would welcome.

Political unrest since the 2011 ouster of longtime autocrat Hosni Mubarak has battered the Egyptian economy, leaving the vital tourism industry in tatters and making it difficult to attract foreign investors.

The government is reforming investment laws in an attempt to improve transparency and slash Egypt's notorious red tape. A major investment conference is scheduled for March.

Economist William Jackson from Capital Economics in London said the currency drop could reassure investors concerned about lingering instability.

"People have been hesitant to invest in Egypt while the currency may weaken. If you put your money into Egyptian pounds and they depreciate by 20 percent you've suddenly lost 20 percent in U.S. dollar terms," he said.

Cairo has grown to rely on massive influxes of aid from Saudi Arabia, Kuwait and the United Arab Emirates to keep its economy afloat and buttress the state budget, which is deep in deficit.

Its foreign reserves stand at less than half the $36 billion held before 2011, just enough to cover around three months of imports - a level economists consider a bare minimum.

The currency move could also help generate more revenue from markets in the European Union, Egypt's main trading partner, by making Egyptian exports more competitive, Jackson said.

© 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.

Latest News