The Egyptian pound, which has weakened steadily since May, stabilized at 5.6780, supported by a modest euro rally in the past week against the US dollar.
Europe is Egypt’s biggest trading partner.
"The euro is strengthening a little bit and if this momentum is kept, it will reflect on the Egyptian pound against the US dollar and the pound will strengthen," a trader said, adding the pound could move towards the 5.64-range by year-end.
The Central Bank of Egypt says in its monthly report that "inflationary pressures are assessed to have remained weak through May 2010, despite sporadic price increases in a number of food items."
Investment bank EFG-Hermes says it echoes this assessment and sees interest rates on hold.
"This leveling of interest rates provides an appetite for foreign investors to invest in the Egyptian fixed income market," the trader said.
The pound trades at 5.6780 to the dollar versus 5.6785 Tuesday.