The Egyptian pound will probably turn positive in early 2011 as political uncertainty over the country’s parliamentary elections becomes less of a concern to international investors, Emerging Markets Briefing said in a note released on Tuesday.
It forecasts that the central bank will hike the policy rate by 100 basis points (bps) in the first quarter of 2011 due to rising inflation in 2010, particularly in November.
"The remainder of the year will likely continue to be negative for the EGP as investors keep cutting their positions, but the seasonality will probably turn positive in early 2011. This is because investors will consider re-entering the local market as they put risk back to work," Emerging Market said.
A Cairo-based currency trader said the market is optimistic Egyptian inflation will calm by year-end and that solid foreign direct investment figures will translate into a stronger pound. "Two days ago we have seen foreign investors entering into buying positions in local shares in good amount," said one Cairo-based trader.
The Egyptian pound traded as strong as 5.7840 to the dollar on Tuesday, strengthening from its 5.7980 close on Monday. "By the end of yesterday, the Egypt-dollar level reached its highest level at 5.80, where there is strong resistance," the trader said.
"The pound going down 80 bps today is normal, as the euro-dollar currency movement rising gave room for the Egyptian pound to strengthen."
