Traders are pushing back expectations for a devaluation in the Egyptian pound, with Citigroup Inc. predicting that the central bank will likely hold off on such a move at least through the end of next month.

Another steep drop in the pound before the end of Egypt’s fiscal year ending June 30 could derail the government’s target of a 6.5% budget deficit and for stabilization of the nation’s debt relative to its gross domestic product, said Citigroup’s Luis Costa. The Central Bank of Egypt will also probably wait for “bumper tourism” revenues of about $14 billion to filter through the economy before deciding on the need for another pound recalibration, he said.

“The CBE will likely not engineer another aggressive pound devaluation over the next month or so,” Costa, Citigroup’s London-based head of CEEMEA strategy, wrote in a note on Wednesday. Citigroup’s strategy is to sell the dollar against the Egyptian currency in the one-month non-deliverable forwards market, “on the back of the view of no EGP depreciation before the end of this fiscal year,” Costa said.

While derivatives used to hedge risks or for speculation have been signaling the approach of Egypt’s fourth devaluation since March 2022, traders have trimmed those bets in the past two weeks. In the non-deliverable forwards market, the pound’s one-month contract traded around 32.9 on Thursday, after recovering from an all-time closing low of 35.3 on April 25.

In comparison, the pound’s 12-month contract was at 43.3 per dollar, signaling expectations of a steep devaluation eventually. The Egyptian currency was trading at 30.9 on Thursday after losing almost half of its value in the past year.

The pound’s stability since March — even as its value declines on the local black market — has some investors questioning Egypt’s commitment to a flexible currency regime. A senior International Monetary Fund official said this month that the government is “serious” about applying a flexible foreign-exchange rate — a key condition of a $3 billion loan agreement with the Washington-based lender.

Gulf countries are waiting for more certainty on the currency before making good on promises to provide billions of dollars in investment. Officials have said they expect to bring in at least $2 billion from the sale of some state assets by the end of June.