The Egyptian pound touched a 3-1/2 year low against the US dollar as foreigners pulled money out of emerging markets and local investors sought more dollars.
The currency, which has been hovering around 5.70 since mid-July, reached 5.7038, its lowest since January 2007.
The dollar is again testing strong 5.70 area resistance (the March 2009 peak) against the Egyptian pound, any clean break (a rise into the 5.71 area) would trigger a bullish right triangle formed by the 5.70 level and the August lows.
The pattern would be a classic sign that the dollar’s uptrend is resuming and would target the 5.76 area.
"There is some local demand for the dollar right now, and the foreign inflows to Egypt have been slowing compared to previous weeks, despite the recent activity on the stock market," said a Cairo trader.
But others think the pound will not easily break to a new low; "the behavior of the Egypt pound against the dollar in the past three weeks is not in line with flows coming into the country and we have not seen any outflows supporting a depreciation. The current level does not make fundamental sense, even given the euro’s depreciation of the past 10 days," said one.
"Fundamentally we should be bouncing back from the support level. I think it is quite possible that we’ll get back to 5.6 or 5.65 because wheat prices are going up and there will be deflationary pressure in Egypt — the solution will not be raising interest rates but hiking the pound to reduce imported inflation."