Egyptian Pound Sets For First Weekly Gain, Dollar Bonds Rose
The Egyptian pound is headed for the first weekly gain in five after stocks climbed and on signals there won’t be a change in the country’s currency policy. The dollar bonds rose.
The currency, subject to a managed float, strengthened 0.1 percent this week after reaching 6.0623 intraday on June 27, the weakest level since December 2004. It was unchanged at 6.056 at 11:33 a.m. in Cairo, according to data compiled by Bloomberg. Twelve-month non-deliverable pound forwards, which provide guidance to expectations, retreated from a record low.
President Mohamed Mursi met with central bank governor Farouk El-Okdah twice this week, discussing the banking industry, foreign exchange and the economy, the official Middle East News Agency reported. The central bank is due to release foreign reserves data for June this week.
“The currency is taking cue from the stock market’s gains and the president’s meetings with Okdah, which were widely seen signaling there won’t be a change in the central bank’s policy of maintaining the value of the pound,” said Moustafa Assal, managing director of Bondlink Advisory, a Cairo-based financial advisory firm that mostly trades government securities.
Mursi was on June 24 declared the winner of Egypt’s first free presidential contest, sending the benchmark EGX30 on a 20-percent surge in six days. In speeches following his victory, he praised the North African nation’s military leaders and promised to build a “civil, modern state.” Talks are continuing to replace the government of Prime Minister Kamal el- Ganzouri.
Egypt will probably reach a $3.2 billion loan agreement with the International Monetary Fund after Mursi forms a government, Abdallah Shehata, a member of the economic committee at the Islamist Freedom and Justice Party, said July 1. Recovery in tourism and economic activity will help support the exchange rate, he said, adding “there is no need for devaluation.”
The pound’s 12-month forwards strengthened to 7.45 a dollar from 7.95 on June 26, the lowest level since Bloomberg started tracking them in 2007. That reflects expectations for the currency to lose 19 percent over the life of the contracts.
The yield on the Egypt’s 5.75 percent dollar bonds due in 2020 declined a fifth day, losing four basis points, or 0.04 of a percentage point, to 6.23 percent at 11:41 a.m. in Cairo, according to data compiled by Bloomberg. That’s the lowest level on a closing basis since November.
