EGYPT: FOREX DEVELOPMENTS.
Summary: In a recent report on Egypt, EFG Hermes said that the tightening of global monetary conditions and imbalances in a few emerging market countries have rattled global markets causing a reversal of capital outflows from emerging/frontier markets.
In a recent report on Egypt, EFG Hermes said that the tightening of global monetary conditions and imbalances in a few emerging market countries have rattled global markets causing a reversal of capital outflows from emerging/frontier markets. Egypt is having its share of volatility represented by foreign capital outflows and rising domestic borrowing costs. The local debt market has seen nearly US$ 8 billion of outflows since May. Outflows pushed local yields higher, leaving the government to cancel three straight bond auctions in order to resist paying higher yields. This combination of outflows and rising yields have spooked the local equity market, leaving concerns about a potential sharp weakening in the USD-EGP, as well as further tightening of monetary policy. EFG Hermes yet argues that the strong foreign reserve position and stable inflation outlook provide a relative comfort on EgyptEe's macro outlook as it deals with heightened global market volatility. The economy has already seen nearly US$ 8 billion portfolio outflows without putting any notable pressure on foreign reserves or the currency. This should come as no surprise given the way the Central Bank of Egypt (CBE) initially managed the flows when they first came in EeAu the flows were circumvented from the wider system thanks to the repatriation mechanism, which parked most of the flows in an Ee"unofficialEe" reserve account. This meant that the EGP made minimal gains on the way up and will make minimal losses as the flow has reversed.
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|Publication:||EMBIN (Emerging Markets Business Information News)|
|Date:||Oct 10, 2018|
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