Ahmed Kamel – Egypt Daily News
Egypt’s currency came under fresh pressure as the Egyptian pound weakened sharply against the U.S. dollar in the first two days following the outbreak of the U.S.-Iran conflict, driven largely by partial foreign investor outflows from local debt markets.
According to data from the National Bank of Egypt, the pound lost more than EGP 1.80 compared with last Thursday’s close, briefly approaching the EGP 50-per-dollar threshold for the first time since July 2025.
In early trading, the currency fell to around EGP 49.7 for buying and EGP 49.8 for selling before trimming losses later in the session to about EGP 49.17 and EGP 49.27 respectively, though it remained near six-month lows.
Foreign Outflows Drive Pressure
Banking expert Mohamed Abdel Aal said the decline was expected given the partial exit of some foreign investors from Egyptian treasury instruments amid geopolitical tensions linked to the U.S.-Iran war.
He described the move as a natural market reaction to heightened regional risk, noting that global investors often reduce exposure to emerging markets during periods of uncertainty.
Surge in Interbank Activity
Pressure on the currency coincided with a sharp jump in Egypt’s interbank dollar market. On Sunday the first trading day after the weekend, interbank transactions surged about 233 percent to roughly $600 million, up from $180 million the previous Sunday.
Analysts said the spike reflects increased dollar demand tied to portfolio adjustments by foreign investors.
“Not a Full Exit”
Mahmoud Negla, executive director of money markets and fixed income at Al Ahly Financial Investments, said the current moves represent a reduction in portfolio weights rather than a mass withdrawal.
He stressed that Egypt is not a direct party to the ongoing conflict, which may help limit the scale of capital flight compared with previous crises.
During the market shock that followed the outbreak of the Russia-Ukraine war in 2022, foreign investors pulled roughly $22 billion from Egypt’s local debt market within six months, triggering a severe foreign-currency crunch.
First Real Test for the Pound
Economists view the current volatility as the first major test of exchange-rate flexibility since Egypt’s recent reform cycle. Over the past 19 months following the currency liberalization, Egypt attracted roughly $30 billion in foreign investment into treasury bills, bringing the outstanding stock to about $45 billion by the end of last September, according to central bank data.
Abdel Aal warned that if the regional conflict persists for another two weeks, the dollar could breach the EGP 50 level.
He added that broader global disruptions particularly to air and maritime shipping could ultimately pose a greater risk to Egypt’s economy than portfolio outflows, by fueling supply chain pressures and pushing inflation higher.
For now, markets appear to be closely watching geopolitical developments, with the pound’s near-term trajectory likely tied to the duration and intensity of the regional conflict.
