It’s a sign of greater flexibility for the pound, which saw long periods of stability after authorities in March enacted their fourth devaluation since early 2022, reported Bloomberg citing the investment giant.
The Egyptian pound (EGP), which breached the milestone of 50 per dollar to hit a record low this week, may rebound in early 2025 as a series of seasonal portfolio outflows taper off, according to Goldman Sachs.
The currency fell to EGP 50.8 against the USD on the offshore market Thursday, the latest in an almost uninterrupted six-week streak of declines.
It’s a sign of greater flexibility for the pound, which saw long periods of stability after authorities in March enacted their fourth devaluation since early 2022, reported Bloomberg citing the investment giant.
Driving the decline in December was a “huge spike” in redemptions of shorter-term Treasury-bills that were issued earlier this year, with investors opting for year-end profit-taking, said Farouk Soussa, Goldman’s economist for the Middle East and North Africa.
This is leading to a “lower roll-over of positions,” particularly as the finance ministry has until recently resisted raising yields at auction in order to keep the cost of borrowing down, said Soussa.
But with the Central Bank of Egypt likely to start cutting record-high interest rates in the first quarter, “a greater issuance across the curve, including in long-dated Treasury bonds, is expected,” according to Soussa. This will give investors a chance to re-enter the local market, which should “lend support to the pound,” he said.
There was also “significant overshoot” during March’s devaluation that’s yet to correct itself, Goldman’s economist said.
The performance of the EGP is being closely watched, both by investors seeking high returns and the International Monetary Fund, which wants the currency to accurately reflect supply and demand.
