The Egyptian pound strengthened on Sunday, reaching a three month high, as importers' demand for dollars at banks eased, bankers told Reuters on Sunday.

Banks were selling dollars at around 15.8 pounds per dollar on Monday, stronger than Thursday's rate of around 16 per dollar.

A less than couple of weeks ago, the USD reached 20 EGP so this decline shows a strong market recovery and the expectation is that the EGP value will improve further in comparison to Jan 2017 but it is not foreseen to go below 12 EGP to 1 USD.

Tamer Youssef, head of treasury at a foreign bank operating in the Egyptian market, said that several reasons drove the fall of the greenback value against the pound in the past few days, highlighting the increased supply of US dollar at banks—as many foreigners invest in local currency government debt instruments; where foreigners invested some $250m in Egyptian treasury bills over the course of one week.

He added that hot money is flowing in to the domestic market after the government successfully signed a loan agreement with the International Monetary Fund (IMF) and posed international tenders for debt instruments that contributed to raising the foreign exchange reserves and improved the credit rating of Egypt.

He noted that banks covered pending requests for foreign currency and began injecting surplus into the interbank market, which contributed to lowering the prices.

Moreover, he explained that importers have been seeking less hard cash as consumers seemed reluctant to buy high priced imported goods, in addition to the restrictions posed on imports by the government back in March 2016.

The restrictions limited the size of imports through increasing customs duties on many goods, implementing regulations on imports to be paid only through banks, and setting special specifications of goods that are imported.

We think that Importers have a pile up of goods. When the prices rose after the float, people's purchasing power declined and sales in most (imported) goods slowed down and with it, their demand for dollars to import more goods slowed as well.

CBE said that the foreign investments in the Egyptian 91 and 266 days treasury bills posed by the Ministry of Finance on Sunday amounted to EGP 2.4bn, out of EGP 11bn total worth of bills in the two tenders combined.

CBE also said that while some analysts have seen foreign investments in bills as hot money, since they have been invested in short-maturity financial instruments that can exit the market quickly, T-bills remain one of the most important sources to finance developing and developed economies, provided they are utilized well.

Source: Different Sources (Daily News /Egypt Independent, etc)