4:47 pm
Wednesday 11 January 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 to invest in the Egyptian pound in the treasury bill auction scheduled for tomorrow, Thursday, which resulted in a movement in the price of the dollar against the pound today, up and then down.
The pound’s exchange rate recorded a historic decline against the dollar during today’s Wednesday trading in banks, as the price of the dollar jumped to a record high for the first time within the £32 range, before to fall back to less than £30 at close of trading.
The entry of foreign investors into the Egyptian market takes place for the first time in a year, almost a year after their exit due to the Russian-Ukrainian war.
Dr Mostafa Madbouly, prime minister, said earlier that the Russo-Ukrainian war caused the outflow of $22 billion in indirect investments in treasuries and bonds over the past year.
The sources highlighted that the entry of foreigners to buy the dollar required a reduction in the price of the pound to motivate them to invest in the Egyptian pound through debt instruments (Treasury bills).
Any foreign treasury bond investor, when entering any emerging market country, including Egypt, seeks to buy the local currency at a low price against the dollar and earn a rewarding yield to make gains.
The investor also needs, upon his exit after the expiry of the terms of the bills, for the price of the pound against the dollar to rise to a level above the price he has entered, or to the same price, in order to obtain gains from the difference of two prices.
On Thursday, the finance ministry agreed to raise the interest rate to 2% in an offer of treasury bills, so that the yield jumped to the level of 21.490% for the first time in about 5.5 years. according to the data published on the website of the Central Bank.
Treasury bills are one of the public debt instruments, according to which the Ministry of Finance borrows in Egyptian pounds to meet its financing needs for the general state budget, and in exchange for the money it pays interest.
The entry of foreigners came today after the International Monetary Fund announced, in a report released on Tuesday, on the recently agreed program of cooperation with Egypt in economic reform, the Egyptian authorities’ commitment to an exchange rate flexible that adapts to balance of payments dynamics, avoids the re-accumulation of imbalances and supports competitiveness.
