The EGP continued to weaken against the USD in trading yesterday, slipping to fresh lows and ending the day at a selling price of around EGP 51.44-51.47 at public and private banks, marking the second consecutive day of an exodus of foreign investors from the local debt market. Interbank market transactions since trading began on Sunday are estimated to have reached a total of USD 1.5 bn, a banking source told EnterpriseAM.

Some analysts think the EGP could slide further, including Abu Dhabi Commercial Bank Chief Economist Monica Malik, who told Bloomberg that the national currency could end up trading at EGP 54 against the greenback.

REFRESHER- The EGP fell just over 1% against the greenback on Sunday, with the drop coming amid global uncertainty after US President Donald Trump’s tariffs came into effect over the weekend, which sent shockwaves across global markets. The day saw a significant exit of foreign investors from our local treasury market — an exit that came in tandem with the Madbouly government deploying more of its hard currency than usual to take advantage of the sharp decline in global commodity prices.

The estimated outflows over these past few days are over USD 1 bn, which included a number of foreign portfolio investors taking a step back from the country’s carry trade, Goldman Sachs and EFG Hermes economists told the business news information service. “The global risk-off triggered by Trump’s tariffs have led to a ‘flight to safety,’ with investors trimming their exposure to all risk assets, Egypt included,” said Goldman’s MENA economist Farouk Soussa. “Egypt is a relatively weak credit with large external-financing needs, and so is seen as vulnerable to a selloff,” he added.

But don’t panic, “we are still within safe limits, and once the wave of volatility calms, hot money will return to the Egyptian market,” our source told us, emphasizing that the scale of the outflows is not overly concerning. Meanwhile, demand for foreign currency may be lower than it was on Sunday due to a decline in executed transactions, our source suggested. Furthermore, Egypt is “relatively insulated from the direct impact of tariffs,” according to Soussa, who noted that exports are not a major driver of the country’s growth. “With an undervalued currency and IMF backing, Egypt is well-positioned to benefit from a redeployment of risk when that comes,” he added.

The current situation is being driven by a state of uncertainty in global markets at large, the source said, adding that they attribute the continued weakening of the EGP against the greenback to the flexibility of the exchange rate, with demand pressure mounting on the interbank market. “It is difficult to judge exchange rate developments at the moment, given the challenge of predicting how global markets will respond to the turbulence,” our source told us.

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