The Clap
Investors are reconsidering expectations of a significant EGP devaluation, as Egypt anticipates an increased rescue package from the International Monetary Fund (IMF), reported Bloomberg.
What
After initially anticipating a substantial EGP devaluation, investors are now scaling back expectations. The value of non-deliverable forwards (NDFs) in the three-month market indicates a shift in sentiment. On Thursday, the USD-EGP rate in three-month NDFs dropped below 40, marking a notable decrease from its record high of 45 at the close of December, as reported by the source.
Claps Class
Non-deliverable forwards (NDFs) are financial instruments that allow investors to bet on currency movements. That’s why the recent change in NDFs over a three-month period signals a notable shift in investor sentiment regarding Egypt’s currency.
So What
This means investors are now anticipating a softer devaluation, not a harsh one, reflecting complexities in IMF negotiations and the country’s hopes for a larger rescue package.
Some Context
Egypt, grappling with economic challenges, is actively seeking an increased IMF rescue package. The IMF has already agreed to expand the package, prioritizing controlling inflation in Egypt rather than pursuing a more flexible currency rate.
