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Egyptian pound strengthens on renewed foreigner interest

A lower budget deficit and improved ratings are helping foreign investors build an appetite for Egyptian debt.
12.07.11 | Source: Al Ahram

Egypt's pound reached its strongest against the dollar since 22 June on Monday, with forex traders citing foreign interest in recent Egyptian Treasury bill sales and Electrolux's purchase of Egyptian appliance maker Olympic Group.

"We saw some foreign players selling dollars in the market. We believe they may be showing interest in local T-bills," says the head of foreign exchange at one Egyptian bank.

T-bills yields have started to fall since an auction was cancelled last week as investors demanded higher returns. The average yield on nine-month notes dropped 21 basis points from last week’s auction, to 12.681 per cent.

"As the year progresses and the foreign money starts coming in yields will come down," Richard Fox, London-based head of Middle East and Africa Sovereigns at Fitch Ratings, was quoted as saying by Bloomberg. “There may not be huge downward pressure, but at least the upward pressure should dissipate.”

The drop in yields suggests a revived interest in t-bills by foreign investors. Such an interest could be the result of the government's shift towards austerity demonstrated in its cuts in the budget deficit to around 8.6 per cent, down from 11.1 per cent.

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