The USD held firm just above the EGP 50 mark as banks closed on Thursday for the weekend, capping a day that saw investors sell down debt and equity positions worth nearly USD 1 bn, a senior banker tells EnterpriseAM. The scale of outflows on Thursday was considerably larger than the week’s average and nearly matched levels seen when markets first opened after the conflict started last Saturday.

We saw USD 3.5 bn in total interbank volume last week, more than double the USD 1.6 bn the week before. Much of this activity — including USD 710 mn on Thursday — was driven by banks fulfilling foreign investors’ exit requests.

Hot money outflows now stand at c.USD 3 bn since the conflict started, another banker told us. Egypt had attracted some USD 45 bn in portfolio investment before the drones started flying.

This isn’t a bad thing: Investor confidence in the central bank’s commitment to a flexible exchange rate has gotten a boost, the second banker told us, signaling to some more risk-tolerant investors that it might be worth staying in the market to avoid the FX loss they’d take by pulling out now.

Two other bankers we spoke with over the weekend told us they saw no sign that the central bank had its thumb on the scale: “Look, the proof is in the interbank market,” one said, adding, “You’d hear the howling now if investors were locked into positions and the CBE was telling us to slow-walk them” out the door.

Egypt has more breathing room than the headlines suggest. Importers typically front-load orders ahead of Ramadan, a government official we spoke with over the weekend noted, meaning it’s unlikely in the near-term that the EGP will face additional pressure from a spike in demand for letters of credit and letters of guarantee.

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