The US dollar price continued to decline against the Egyptian pound on Monday, reaching its lowest level since February 2017. The average dollar price in the interbank exchange market reached EGP 15.7417 to buy and EGP 15.8417 to sell, compared to EGP 15.7706 to buy and EGP 15.7806 to sell on Sunday.
At the Central Bank of Egypt (CBE), the US dollar reached EGP 15.7255 to buy and EGP 15.8538 to sell compared to EGP 15.7528 to buy and EGP 15.8826 to sell on Sunday.
The American currency lost more than about 25 piasters of its value since the beginning of January, on the background of Egypt receiving strong cash flows that supported the pound’s position against the US dollar.
The CBE confirmed, in a previous statement, that the remarkable increase in banks’ foreign exchange resources, especially from foreign exchange fund investments in Egyptian financial markets, had contributed to the decline in the exchange rate of the US dollar against the Egyptian pound.
The CBE said the total foreign exchange flows to banks recorded about $1.7bn in just five days.
Bloomberg International reported that the Egyptian pound, which was one of the best-performing currencies in the world during 2019, will continue to rise with the increase in foreign exchange flows. It added that the rise of the pound, whose exchange rate was liberalised in late 2016, led to an increase in the attractiveness of investing in debt instruments in local currency last year, which recorded a very attractive return of about 15% on local bonds, in addition to the economic reforms recommended by the President Abdel Fattah Al-Sisi.
Minister of Finance Mohamed Moeit said on Monday that the balance of foreigners in government financial instruments amounted to $22bn at the end of December 2019.
According to previous figures of the CBE, foreign investments in treasury bills increased by about $470m in November 2019, to reach $15.47bn compared to $15bn in October.
Before its recovery in 2019, Egypt lost about $10.8bn in foreign investments in treasury bills during the period from the beginning of April 2018 to the end of last December, according to data from the CBE.
Emerging markets were exposed to a wave of foreign exit from investments in government debt instruments starting from April 2018 with the rise of the US dollar, and the growing fears of the economies of these markets, especially after the crises of Turkey and Argentina. However, the crisis slowed down in December, and then reflected positive flows since the beginning of this year.
Mohamed Abdel Aal, a banking expert and a member of the Suez Canal Bank’s board of directors, expected that indicators regarding foreign investments in government debt instruments will be more positive during the coming period, in light of the continued strong real return on them compared to other markets.
Monett Doss, a macroeconomic and banking analyst at HC, expected the continuity of the Egyptian debt market’s attractiveness to flow and benefit from price differences (Carry Trade), as it provides a positive difference in the real interest rate of about 4.51%, compared to other emerging markets such as Turkey. It provides a real interest rate of about 0.58%, which leads to a positive difference in the interest rate of 3.93% for Egypt.