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Sources: The return of global funds to invest in the pound behind the moves of the

04:47 PM

Wednesday, January 11, 2023

I wrote – Manal Al-Masry:

Two sources told Masrawy that global funds (foreign indirect investment) today, Wednesday, made transfers of millions of dollars to banks in order to invest in the Egyptian pound in the treasury bills auction scheduled for tomorrow, Thursday, which led to a movement in the price of the dollar against the pound today, up and then downhill.

The exchange rate of the pound recorded a historical decline against the dollar during trading today, Wednesday, in banks, so that the price of the dollar jumped for the first time to a record level within the limits of 32 pounds, before returning to the decline to less than 30 pounds at the end of trading.

The entry of foreign investors into the Egyptian market comes for the first time in a year, nearly a year after they left due to the Russian-Ukrainian war.

Dr. Mostafa Madbouly, Prime Minister, said earlier that the Russian-Ukrainian war caused the exit of $22 billion in indirect investments in treasury bills and bonds over the past year.

The sources pointed out that the entry of foreigners to buy the dollar necessitated a reduction in the price of the pound to motivate them to invest in the Egyptian pound through debt instruments (Treasury bills).

Any foreign investor in treasury bills, when entering any emerging market country, including Egypt, is looking to buy the local currency at a low price against the dollar, and get a rewarding return to achieve gains.

The investor also needs, at the time of his exit after the expiry of the bills’ terms, for the price of the pound against the dollar to rise to a higher level than the price he entered, or at the same price, in order to achieve gains from the two price difference.

The Ministry of Finance agreed to raise the interest rate by up to 2% in a bid for treasury bills last Thursday, so that the yield jumped to the level of 21.490% for the first time in about 5 and a half years, according to data published on the Central Bank’s website.

Treasury bills are one of the government debt instruments, according to which the Ministry of Finance borrows in Egyptian pounds, to meet its needs to finance the state’s general budget, and in exchange for the money it gives interest.

The entry of foreigners came today after the International Monetary Fund announced, in a report issued yesterday, Tuesday, on the recently agreed program of cooperation with Egypt in economic reform, the commitment of the Egyptian authorities to a flexible exchange rate that adapts to the dynamics of the balance of payments, avoids the re-accumulation of imbalances, and supports competitiveness. .

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