PETRODOLLAR COLLAPSE! Egypt announces DECOUPLING from US dollar, Dominoes begin.
Published at : October 30, 2022
There are few currencies that have been affected by the strengthening of the US dollar so far this year. In Asia, the momentum of the yen's depreciation against the dollar has continued to advance, with the exchange rate against the dollar once breaking the 150 mark last week. As the world's safe-haven currency, it is definitely a historic event to see such a depreciation.
For Japan, however, the yen breaking 150 is not quite a deterioration in economic fundamentals, but the depreciation of the currency has had a far greater impact on emerging economies. Due to the chaotic fiscal situation, Egypt has started to seek new financing from the IMF this year, and a more flexible exchange rate is one of the conditions given by the IMF. In order to be able to meet the terms of the financing, Egypt will develop a new currency indicator, which goes some way to dispelling the notion that the Egyptian pound is to be pegged to the US dollar.
Egyptian President Abdel, who took office in August this year, has said that the indicator will be based on a basket of multiple currencies, possibly including gold. The Central Bank of Egypt is also working to introduce foreign exchange hedging and has completed futures contracts in reforming its foreign exchange trading system.
It is about the idea of a pegged exchange rate," he said. The US is not our main trading partner and I don't know why people are always fixated on the dollar. Part of our success is changing the culture and perception that we are tied to and that we want people to see us against any one currency."
The Middle Eastern country has been particularly "hurt" by the spillover from the situation in Ukraine. Egypt is the world's largest wheat importer, with more than 80 per cent of its wheat imports coming from Russia and Ukraine, and 70 per cent of its sunflower oil from these two countries. But the current global food and oil prices have soared, and Egypt has paid a huge financial price for this.
Translated with www.DeepL.com/Translator (free version)
For Japan, however, the yen breaking 150 is not quite a deterioration in economic fundamentals, but the depreciation of the currency has had a far greater impact on emerging economies. Due to the chaotic fiscal situation, Egypt has started to seek new financing from the IMF this year, and a more flexible exchange rate is one of the conditions given by the IMF. In order to be able to meet the terms of the financing, Egypt will develop a new currency indicator, which goes some way to dispelling the notion that the Egyptian pound is to be pegged to the US dollar.
Egyptian President Abdel, who took office in August this year, has said that the indicator will be based on a basket of multiple currencies, possibly including gold. The Central Bank of Egypt is also working to introduce foreign exchange hedging and has completed futures contracts in reforming its foreign exchange trading system.
It is about the idea of a pegged exchange rate," he said. The US is not our main trading partner and I don't know why people are always fixated on the dollar. Part of our success is changing the culture and perception that we are tied to and that we want people to see us against any one currency."
The Middle Eastern country has been particularly "hurt" by the spillover from the situation in Ukraine. Egypt is the world's largest wheat importer, with more than 80 per cent of its wheat imports coming from Russia and Ukraine, and 70 per cent of its sunflower oil from these two countries. But the current global food and oil prices have soared, and Egypt has paid a huge financial price for this.
Translated with www.DeepL.com/Translator (free version)
Egyptian oilEgypt's use of RMBEgypt's rejection of the dollar