EGP continues strengthening against USD
EGP continues to strengthen against the USD: The EGP has extended its 11-week rally against the greenback, gaining another EGP 0.11 in the past week, according to central bank data. The exchange rate hit EGP 17.25 to the USD on Thursday, the strongest showing for the EGP since March 2017.
Look for a ‘correction’ when if the EGP hits 17.10 to the greenback: The currency gains have nothing to do with Moody’s upgrade of Egypt’s credit rating, EFG Hermes’ Mohamed Abu Basha told the local press. As he explains, the market is sensitive to investors’ activity in the debt market, where a recent spur in buying is propping up the EGP. However, the gains will likely be temporary, as investors will eventually sell off their holdings. Investors may also be scared off if the USD hits EGP 17.10, at which point Abu Basha says they might see the currency as too risky.
The EGP rally had been attributed in March to Egypt’s improving hard currency position, with CI Capital’s Hany Farahat pointing at the time to “tourism, exports, substitution of natural gas imports with domestic production,” peaking remittances, slightly improving FDI, and the central bank’s decision to end the FX foreign repatriation mechanism in December.