Bets on Big FX Devaluation (EGP USD) In Egypt Crushed as IMF Deal Nears

Investors are rushing to unwind their bets on a big depreciation of the Egyptian currency early this year as the country’s government is nearing a deal with the International Monetary Fund to boost the size of a rescue package.

Short-term non-deliverable forwards, or NDFs, which are derivatives used to hedge risks and speculate, have appreciated rapidly this year, signaling that expectations of a steep devaluation are fading. The pound’s three-month contract traded below 40 on Wednesday, after recovering from an all-time closing low of 45 in late December, narrowing the gap with the official rate.