The Egyptian pound has declined steadily against the US dollar in recent days, reaching LE47.95 on Tuesday from LE46.72 a week earlier. The drop stems from foreign investors and funds withdrawing from emerging nation bond markets, with nearly LE12 billion (US$250 million) exiting Egypt’s market over the past week.
The Egyptian pound has experienced a notable depreciation against the US dollar, reaching LE47.95 on Tuesday compared to LE46.72 a week prior. According to stock exchange data, foreign investments worth nearly LE12 billion (US$250 million) have exited the Egyptian market over the past week.
Mahmoud Nagla, executive director of money markets and fixed income at Al Ahly Financial Investments Management, attributed the decline to foreign currency outflows amid geopolitical threats impacting investors' appetite for government debt. He noted that global markets have reacted to the United States' deployment of military assets to the region as it threatens to strike Iran. The pound is fluctuating in line with waning confidence in global markets, Nagla said, since the government no longer intervenes to manage its value as it once did.
Nagla explained that the speed of this decline is tied to increased exchange rate flexibility rather than the scale of exiting capital, referencing a previous drop in April when the dollar exceeded LE51 amid LE2.25 billion outflows in one week. He described the recent foreign exit from the government debt market as 'a simple adjustment in portfolio rebalancing' due to rising regional risks, not an exceptional situation.
MP Mohamed Fouad, a member of the House of Representatives’ Economic Affairs Committee, anticipated that the pound’s value will not drop indefinitely. 'There are favorable global conditions that could keep the dollar trading within a range of LE47.5 to LE50 over the next 12 months,' Fouad said, citing an expected global monetary easing cycle and the government’s intent to maintain a positive real interest rate to attract investors. Nagla agreed that the pound’s flexibility and depreciation could eventually draw foreign investors back for profits. He stressed that the current events are not comparable to the 2020 Covid-19 outbreak, when over US$15 billion in treasury bills and bonds were sold, or the 2022 Russia-Ukraine war, which saw about $20 billion exit the market.
