* Egyptian pound strengthens to 17.75 per U.S. dollar
* Confidence picking up as foreigners buy up Egyptian debt
* Yields on treasury bills fall around 2 percentage points
* Backlogs of dollar orders easing following pound float
By Ahmed Aboulenein
CAIRO, Feb 9 The Egyptian pound strengthened at
banks as foreign investor confidence picked up and backlogs of
U.S. dollar orders to finance imports eased, bankers and
economists told Reuters on Thursday.
The U.S. dollar was being bought for around 17.75 pounds at
most banks, down from around 18.75 last week. Banks were paying
clients around 17.8 per dollar.
"The pound is strengthening because the demand for dollars
is slowing, especially from importers of non-essentials," said
Allen Sandeep, head of research at Naeem Brokerage in Cairo.
"We had a lot of backlog towards the end of last year but
that backlog is now easing."
Bankers said there had also been a massive rally on Egyptian
treasuries this week which transferred into the secondary market
and was reflected in the pound to dollar exchange rate.
"As of Sunday foreign appetite for treasury bills has been
huge. They are buying and in large numbers. They are buying
three-, six-, nine-month bills, one-year bills. They are buying
everything," one banker told Reuters.
Average yields on six-month and one-year treasury bills
dropped sharply by around 2 percentage points, central bank data
showed on Thursday, as more foreigners bought up Egyptian debt.
"The yields falling indicate that demand from foreigners has
picked up. Foreigners have already bought $1.15 billion worth of
treasury bills and the number should be growing," said Sandeep.
The central bank abandoned its currency peg of 8.8 pounds to
the U.S. dollar on Nov. 3, hoping to unlock currency inflows and
bring back foreign investors who were driven away after the 2011
uprising that ousted Hosni Mubarak.
Under the currency peg, dollar supplies were rationed by the
central bank, forcing businesses to go to the black market for
foreign currency. Bankers said dollars were finally being
absorbed back into the banking system.
'BY THE BOOK'
The float, which helped Egypt clinch a $12 billion
three-year loan from the International Monetary Fund, is part of
a larger government economic reform programme that included fuel
price hikes and subsidy cuts.
Economists say these steps have gone a long way in restoring
foreign investor confidence shattered by years of political
"They floated the pound, are cutting subsidies, and
basically doing all the right things by the book and in
accordance to IMF conditions. They are moving in the right
direction," said Sandeep.
Remittances from expatriate Egyptians also helped pump more
dollars into the system, bankers said, having risen 11.8 percent
in the fourth quarter of 2016, the central bank said on Monday,
with most of the increase coming after the float.
Egyptians working abroad send back billions of dollars a
year in remittances, an important source of hard currency for a
country that has seen tourism, foreign investment and exports
dwindle in the political turmoil that followed the 2011 revolt.
Net foreign reserves rose to $26.363 billion at the end of
January from $24.265 billion at the end of December, the central
bank said on Sunday. Reserves were at roughly $36 billion before
The economy still had a long way to go, however, economists
said. Business activity in Egypt shrank for the 16th consecutive
month in January as record-high inflation pushed up prices
charged by businesses and sent employment to a four-month low, a
survey showed on Sunday.
(Editing by Toby Chopra)