High-performing EGP “overvalued,” likely to fall amid covid-19 EM asset dump -Bloomberg report: The EGP has continued performing well amid the fallout from the global covid-19 pandemic, in stark contrast to many African currencies that have fallen sharply in the last month. But investors are increasingly seeing the EGP as overvalued, and the currency is likely to ease against the USD despite the significant gains seen this year, Bloomberg reports.

The EGP is the world’s strongest currency this year after Myanmar’s and has maintained its resilience despite surging EM outflows over the past month in response to covid-19. But with gains of 2.1% posted against the USD this year, Morgan Stanley analysts are now advising investors to reduce exposure to EGP-denominated bonds, especially following the 650 bps in rate cuts the Central Bank of Egypt has enacted since last July. Prior to the escalation of the pandemic at the end of February, the EGP had surged to new three-year highs of 15.49 against the greenback. The EGP is currently changing hands at 15.69.

The EGP gained almost 13% against the USD between early 2019 and late February 2020. The surge was driven by strong investor appetite for Egyptian debt, remittance flows from Egyptians living and working overseas, increasing tourism revenues, and a decrease in businesses and individuals hoarding USD, starting in early 2017.