Egypt’s currency flexibility still in doubt after huge selloff

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Egypt

Egypt’s currency flexibility still in doubt after huge selloff

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Egypt’s newly flexible currency is still too tame for a market that’s bracing for more disruption ahead.

Although Egypt has allowed the pound to slide more than almost every other currency in the world this quarter, investors are questioning whether authorities would completely loosen their grip if it comes under more pressure. They may not need to wait long for answers.

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Among developing peers, Egypt is the economy most vulnerable to a currency crisis over the next 12 months, according to a Nomura Holdings Inc. gauge that’s predicted past selloffs.

HSBC Holdings Plc, which previously expected the pound to stabilize around 24 per dollar, now tentatively envisions a move toward 26, which implies a depreciation of around 5.5 percent from current levels.

At stake is the willingness of foreign investors to plow money back into the one-time darling of emerging markets. Their reluctance so far has contributed to a steep rise in the yields on Egypt’s Treasury bills, which reached the highest since early 2019 at the latest auctions.

“Right now there is a lot of confusion as to whether we are in a truly flexible regime,” said Farouk Soussa, an economist

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