### Treasury Bills Reveal the Cause of the Egyptian Pound’s Decline Against the Dollar
#### Foreign Investors Sell 14.4 Billion Pounds in One Week
Recent data from the Egyptian Stock Exchange has revealed significant sales of Egyptian treasury bills by foreign investors during last Thursday’s trading. These sales come in the wake of increased geopolitical tensions following the assassination of Ismail Haniyeh, the head of the political bureau of Hamas, in Iran, and claims by the Israeli army of killing Mohammed Deif, the commander of the Qassam Brigades, in an airstrike last month.
Contrary to the prevailing trend since the Egyptian pound was floated in March, foreign investors turned to selling Egyptian treasury bills last week, recording net sales of 14.46 billion pounds ($297 million), according to data from the Egyptian Stock Exchange.
A week earlier, the Egyptian newspaper “Al-Mal” reported that foreign investors had withdrawn about $4 billion from Egyptian treasury bills in June.
Last week, the exchange rate of the U.S. dollar in Egyptian banks rose to its highest level since the flotation of the Egyptian pound in March, reaching 48.72 pounds.
A fixed-income investment manager at one of Egypt’s largest asset management companies told “Al Arabiya Business” that the movement of the dollar in the market was a direct result of the significant sales in Egyptian treasury bills, despite foreign assets still being at good levels compared to the period before the flotation, recording $14.8 billion versus a deficit of more than $29 billion.
Foreign investments in securities portfolios, commonly known as “hot money,” amounted to $35.5 billion at the end of June.
The asset manager, who preferred to remain anonymous, warned about the maturity date of many treasury bills issued by the Ministry of Finance immediately after the flotation. These are set to mature in March next year, amounting to 440 billion pounds, most of which were bought by foreign investors due to favorable pricing, as they offered cheaper bids than Egyptian banks and funds to the Ministry of Finance at the time.
He added that the second largest foreign investment in debt instruments after the flotation was in 273-day Egyptian treasury bills, which are due to mature in December for a total of 271 billion pounds, followed by 182-day treasury bills worth 100 billion pounds.
He noted that three waves of divestment are expected unless new issuances convince investors to reallocate funds into new treasury bills.
In a related context, a macroeconomic analyst at an investment bank stated that most foreign investments in what is known as the “carry trade” did not involve financial leverage, as the Central Bank of Egypt sought to limit the influx of hot money into the market following the flotation. He pointed out that financial leverage from banks and Egyptian brokerage firms could have inflated the figures for hot money several times over.
The strategic and macroeconomic analyst expects the Central Bank of Egypt to maintain its tight policy even if the U.S. Federal Reserve cuts interest rates this year, due to recent geopolitical tensions and increased risks, which could lead to a shift in capital flows abroad.
By/radwa sherif ✏️✏️📚