The Egyptian pound will remain relatively stable against the US dollar until the end of 2010, a Reuters poll of 11 economists indicated. A strong inflow of foreign currency from investment and services combined with a slow pick-up in imports will allow the central bank to continue its policy of keeping the currency roughly in line with the dollar, economists said. "We're seeing sort of a gradual pick-up in import growth, but it's not strong yet. So there's not much pressure on foreign currency," said Reham ElDesoki of Beltone Financial. "Exports and the capital inflows related to investment or services, including tourism, Suez Canal and worker remittances, are either performing well - in terms of investment, portfolio investment at least - or are gradually recovering," she added. The 11 economists surveyed expected the Egyptian currency, which traded around 5.5111 to the dollar on Wednesday, to remain at 5.51 by the end of June, then rise to 5.53 by end-September and 5.52 by end-December. Egypt has a policy of keeping its currency closely linked to the dollar but allows for minor adjustments in line with dollar movements against the currencies of Egypt's main trading partners, economists say. At the same time, the government as of end-March had a war chest of $34.51 billion in foreign reserves that it could draw on to defend the pound. For more see . This should enable it to weather possible shocks to the currency, including any sudden outflow of capital on succession concerns were President Hosni Mubarak to leave office unexpectedly. The stability of the pound has made the currency increasingly attractive to investors taking advantage of an interest rate differential between it and the dollar. Since February 2009, the central bank has cut its overnight deposit rate by 3.25 percentage points to 8.25 per cent and its overnight lending rate by 3.75 points to 9.75 per cent. The US Federal Reserve benchmark overnight interest rate on the other hand is now in a range of zero to 0.25 per cent. "The interest rate differential between the USD and the EGP is not expected to contract in the near future," HC Securities & Investment said in a research note. In the longer term, the pound is likely to remain strong as well, ING Investment Management wrote on Wednesday. "With foreign investment flows, both direct and portfolio flows, likely to strengthen over the next few years, the external balance should even improve," ING said. "Therefore, we expect the Egyptian pound to continue strengthening." Most of Egypt's main sources of foreign currency dropped following the 2008 global financial crisis but have since begun to recover. In the last half of 2009, the amount of money Egyptians working abroad sent home fell 6 per cent from a year earlier to $4.65 billion, while revenue from the Suez Canal dropped 16.7 per cent to $2.26 billion. and Tourists earned Egypt $10.8 billion during 2009 as a whole, down 2 per cent from 2008.
