May 23, 2019 / 12:19 PM / 5 months ago

Tourism, energy inflows boost Egypt's pound as most EM currencies struggle

CAIRO, May 23 (Reuters) - The Egyptian pound hit a two-year high on Thursday, bucking a downtrend among emerging market currencies with help from inflows in the tourism and energy sectors.

The pound traded at 16.8725 per dollar at 12:30 p.m. on Thursday, having risen through the 17 barrier on Wednesday to close at 16.995, according to a Central Bank average of all bids and offers.

While the deepening trade conflict war between the United States and China has generally heaped pressure on emerging currencies, the pound has risen nearly 5% against the dollar since the beginning of the year.

Egypt’s central bank has attributed its strength to “foreign exchange inflows from multiple sources”.

Purchases from abroad of Egyptian treasury bills have surged since late 2016 when the central bank floated the pound, then pegged at 8.8 to the dollar, under the terms of a deal with the International Monetary Fund.

Tourism revenues and remittances from Egyptians working overseas have also risen sharply, and large natural gas discoveries off the country’s Mediterranean coast have changed Egypt from a net gas importer to a net exporter.

Still, the increase in short-term debt has made the pound vulnerable to the strategies of foreign investors, bankers said.

“Regardless of how the dollar is trading in the world, the main thing that will impact the Egyptian pound is hot money departing,” or a global flight from emerging markets, said one banker who asked not to be named.

Some bankers say the central bank has been intervening indirectly in the market to support the pound, though the bank has denied this. (Additional reporting by Yousef Saba; editing by John Stonestreet)

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