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Egyptian players struggle to foresee market trend after floatation decision

  • 10/11/2016 (13:02)
In Egypt, several players report that they have halted their business following the Central Bank’s unexpected decision to float the Egyptian pound as they are still struggling to evaluate its possible impacts on the markets. On November 3, the Central Bank announced that the local currency was allowed to float freely as part of the government’s efforts to overcome a hard-currency shortage and to recover from poor economic conditions. Following the bank’s surprise move, the gap between the official rate and the black market has narrowed considerably; however the dollar has regained its strength against EGP recently.

A source from Egypt’s local PS producer E-Styrenics reported that the producer has stopped offering to the market following the Central Bank’s unexpected decision.

“We had announced our new prices for November deliveries on November 1. However, we halted our offers after the Central Bank’s flotation decision. We aren’t delivering any cargoes for now as we also stopped the plant operations since we don’t know which pricing strategy to follow. The dollar parity is changing more than once per day and we cannot calculate our margins," said the source.

A plastic end manufacturer said that they have suspended their business for now and they are adopting a wait and see attitude as the market state has not stabilized yet.

"Many players have halted their business as they are not certain about the right pricing policy to be followed in the upcoming period. The market outlook is not clear for now and players are anticipating further decisions from the government that might affect the market’s trend within the upcoming days; therefore many market players are cautious about their business and we prefer to set our calculations day by day," opined another plastic end manufacturer.

A trader reported that the current market situation draws a different picture from players’ initial expectations regarding the effects of the floatation decision. “Some market players were expecting prices to record reductions after the floatation of the local currency; however the US dollar recorded further increases at the banks. In addition, allocations are still restricted for almost all grades, which support the firming trend.”

A film maker stated that offers are getting firmer in line with the USD appreciation in the official market. " The market is getting firmer due to daily changes in the dollar parity. Players are not certain now what will happen within the short term and we are just meeting our immediate needs amid the slowing end product business,” added the converter.
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