Cairo – Mubasher: Forex traders of the Egyptian pound are maintaining their investments in the currency, anticipating the Central bank of Egypt's (CBE) decision to slash interest rates, according to Bloomberg.

“Traders in the pound are betting rate cuts are only a matter of time,” the New York-based news agency said, noting that the Egyptian government was planning to lift fuel subsidies in 2019, which would consequently boost inflation.

On Sunday, the CBE reported that Egypt’s annual core inflation rose to 8.6% in January from 8.3% in December.

Inflation in the most populous Arab state would rise based on global oil prices by around 2% after cutting fuel subsidies, Bloomberg Economics projected.

The CBE’s Monetary Policy Committee (MPC) is expected to keep interest rates unchanged again in its meeting due later on Thursday, five of seven economists polled by Bloomberg said.

Two weeks ago, the EGP witnessed a sudden jump against the USD, rising by around 30 piasters, and marking the first remarkable rise in the EGP/USD exchange rate since May 2018.

Reham El Desoki, an independent economist based in Cairo, told Bloomberg that the appreciation was linked to investors seeking to “lock in higher interest rate yields ahead of what could be a rate cut on the horizon and increased foreign-currency inflows amid a plateaued demand” for hard currency needed for imports.

In 2018, Egypt ended a repatriation mechanism that made foreign investors able to get their USD earnings out of the country.

Despite investors’ growing confidence in the North African nation, the EGP may see further volatility if traders went to the open market.

“The attractive yields will continue to attract more foreigners,” director of macro and strategy at investment bank Beltone Financial Alia Mamdouh told Bloomberg, adding that Egypt has experienced unlikely “waves of outflows”.

It is worth noting that the EGP exchange rate slipped against the US dollar at state-run banks on Thursday by 4 to 7 piasters.