The Egyptian pound has again tested chart support against the dollar at 5.70 in line with the global trend to dump riskier assets on concern over the fragile US economy.
This was a negative surprise to some investors who have been buying Egyptian T-bills in the last few weeks in the belief that the pound has bottomed out. But a break below 5.70 is by no means inevitable; it’s very strong support (the low last month, in March 2009 and in January-July 2007).
A Cairo currency trader said inflation could pick up in coming months, a prospect which is causing big fixed-income funds to move into shorter-term debt, and this suggests the central bank will lean towards raising interest rates, helping support the pound.
"I am optimistic right now, not because of the pace of the US recovery but because of China, which is cooling off a bit but not melting." Even a clean break below 5.70 would not be technically disastrous for the pound; further chart support is at 5.77, the May 2006 low.
