On Wednesday, Egypt's central bank raised interest rates by 600 basis points at an emergency meeting and said it would let market forces set the exchange rate as it moved to an inflation-targeting regime.
Egyptian pound plummeted dramatically against the dollar as markets started, reaching 40 pounds to the dollar from 30.85 pounds.
Tradeweb statistics revealed that the country's international bonds rose, with the 2047 bond up 2.6 cent at 82.3 cent.
According to JPMorgan (.JPMEGDEGYR), investors' premium for Egypt's international bonds over safe-haven U.S. Treasuries fell to 534 basis points, its lowest level since June 2021.
The central bank hiked the overnight lending rate to 28.25% and the overnight deposit rate to 27.25% to expedite monetary tightening and lower inflation.
"To ensure a smooth transition, the CBE will continue to target inflation as its nominal anchor, allowing the exchange rate to be determined by market forces," the bank said in a statement.
"The unification of the exchange rate is crucial, as it facilitates the elimination of foreign exchange backlogs," noted.
In addition to its inflation target, the central bank has managed the pound, which has been pegged at 30.85 to the dollar for a year to maintain its value despite a foreign currency shortage. The government negotiated a large investment deal with the UAE in late February, easing black market pressure on the Egyptian pound.
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