EGP rallies to near three-year high: The EGP rose to its highest level since February 2017 against the USD, breaking the EGP 16 barrier to reach EGP 15.97 yesterday, central bank data shows. The EGP has risen 10.1% against the USD since the beginning of the year, according to Al Shorouk.

USD inflows into government debt instruments have been the key drivers of the rally, unnamed investment bankers tell the newspaper. Foreign holdings of Egyptian treasuries rose to USD 15.29 bn at the end of September. According to the analysts, higher tourism revenues coupled with expat remittances are also playing a role in driving up USD inflows in Egypt. Tourism revenues rose to USD 12.5 bn in FY2018-2019, Tourism Minister Rania Al-Mashat said last month, while Egyptian expats are expected to send home some USD 26.4 bn in remittances this year, according to World Bank data.

And speaking of FX inflows into government debt: Foreign investors piled into some USD 490 mn-worth of Egyptian treasuries yesterday, unnamed banking sources told MENA. The sources attributed the strong inflows to improved investor sentiment on the back of the US and China’s preliminary trade agreement last week.

The EGP’s appreciation is more attributable to global factors than internal conditions in Egypt, veteran economist Hany Tawfik told Al Kahera Alaan’s Lamees El Hadidi in a phone-in last night. Tawfik noted that the EGP has not appreciated against most other foreign currencies, which indicates that we’re actually seeing a depreciation of the USD rather than a true appreciation of the local currency. The economist also noted that Egypt’s balance of payments recorded a deficit of some USD 100 mn, meaning there is “little justification” for Egypt’s currency to be strengthening (watch, runtime: 7:21).

EFG Hermes’ Mohamed Abu Basha was of a different mind, telling Lamees’ lesser half that, in addition to the US-China preliminary trade agreement, an influx of foreign capital into Egyptian debt instruments yesterday was an important reason for the FX rate improvement. There is also generally low demand for USD in Egypt these days, which is helping to keep the exchange rate in check, Abu Basha said on El Hekaya with Amr Adib (watch, runtime: 10:25).

An apparent detente in the trade war between Washington and Beijing has also been a boon for emerging market stock and bond ETFs, which saw around USD 1.15 bn in inflows last week, an eightfold increase from the week prior, according to Bloomberg. “Flows were led by the three biggest emerging-market equities ETFs rather than country-specific funds, signaling investor optimism on the asset class,” the news information service says.