Goldman Sachs sees Egyptian pound recovering against USD in early 2025

Cairo – December 12, 2024: The Egyptian pound, which reached a record low this week by falling past the 50-per-dollar mark, could recover in early 2025 as seasonal portfolio outflows begin to slow, according to Goldman Sachs.

On Thursday, the currency dropped to LE 50.8 against the USD on the offshore market, continuing a nearly uninterrupted six-week decline.

It’s a sign of greater flexibility for the pound, which saw long periods of stability after authorities in March enacted their fourth devaluation since early 2022, reported Bloomberg citing the investment giant.

Driving the decline in December was a “huge spike” in redemptions of shorter-term Treasury-bills that were issued earlier this year, with investors opting for year-end profit-taking, said Farouk Soussa, Goldman’s economist for the Middle East and North Africa.

This is leading to a “lower roll-over of positions,” particularly as the finance ministry has until recently resisted raising yields at auction in order to keep the cost of borrowing down, said Soussa.

But with the Central Bank of Egypt likely to start cutting record-high interest rates in the first quarter, “a greater issuance across the curve, including in long-dated Treasury bonds, is expected,” according to Soussa. This will give investors a chance to re-enter the local market, which should “lend support to the pound,” he said.

There was also “significant overshoot” during March’s devaluation that’s yet to correct itself, Goldman’s economist said.

The performance of the pound is being closely watched, both by investors seeking high returns and the International Monetary Fund, which wants the currency to accurately reflect supply and demand.