Egypt’s Pound Jumps Most in Two Years as Fund Flows Accelerate

CAIRO (Capital Markets in Africa)  – The Egyptian pound advanced the most in almost two years as fund flows into the local Treasury bills market accelerated amid improving risk appetite across emerging markets.

The currency, which EFG Hermes says has become more sensitive to fund flows after the central bank ended a repatriation mechanism for foreign investors late last year, rose 1.5 percent to 17.6287 against the dollar, its biggest gain since February 2017, according to prices compiled by Bloomberg. The Egyptian pound’s 10-day historical volatility jumped to 7.7 percent, the highest since September, from 1.2 percent on Thursday

Global investors have been pouring money into Egypt’s T-bills this year, said Mohamed Abu Basha, head of macro analysis at EFG Hermes in Cairo. “We expect that the currency will witness volatility during the current year, responding to foreign portfolio flows.”

Egypt, which allowed the pound to float in November 2016, had guaranteed foreign investors’ ability to repatriate their proceeds through a central-bank mechanism. Now with that arrangement shut down, investors rely on the open market to change their pounds into dollars.

The central bank stands ready to fend off speculators and ensure debt holders don’t lose out from increased volatility in the currency, Governor Tarek Amersaid in an interview this month.

Source: Bloomberg Business News