SUPERNEWS

Macro

Hedge Fund Nets $40M on Egypt's Currency Plunge

Millennium Management nets $40M from Egypt's currency drop amid economic turmoil and strategic IMF, UAE interventions.

By Alex P. Chase

ᐧ

3/14, 12:01 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
article-main-img

Key Takeaway

  • Millennium Management earned a $40 million profit from Egypt's currency devaluation, thanks to trader Naveen Choppara's bet on the pound's 38% drop.
  • The successful wager involved non-deliverable forwards (NDFs), anticipating Egypt's economic measures to avoid crisis.
  • This trade underscores the strategic bets international investors make on countries facing economic challenges, highlighting Egypt’s recent financial turmoil and IMF deal.

Strategic Currency Bet Pays Off

Millennium Management, a leading global hedge fund, capitalized on Egypt's economic vulnerabilities through a strategic bet by senior trader Naveen Choppara. Anticipating Egypt's currency devaluation, Choppara's wager on non-deliverable forwards (NDFs) yielded a substantial profit of approximately $40 million when the Egyptian pound plummeted 38% on March 6, following a record interest-rate hike by the country's central bank. This move was part of Egypt's efforts to avert an economic crisis, exacerbated by rising commodity prices due to geopolitical tensions and a severe foreign-exchange crisis.

Egypt's Economic Struggles and International Speculation

The backdrop to Millennium's lucrative bet is Egypt's precarious economic situation. As one of the world's largest wheat importers, Egypt has faced significant challenges from surging commodity prices, particularly following Russia's invasion of Ukraine. Additionally, the conflict between Israel and Hamas in neighboring Gaza has intensified Egypt's economic woes. These factors have led to speculation by international investors, including Millennium Management, on the country's financial future and currency valuation.

IMF Deal and UAE's Historic Investment

In response to its economic challenges, Egypt secured a deal with the International Monetary Fund (IMF) to more than double its rescue program to $8 billion. This was further bolstered by a landmark investment from the United Arab Emirates (UAE), with Abu Dhabi wealth fund ADQ committing to invest $35 billion in Egypt. This investment includes a significant real estate development project in Ras El-Hekma and aims to provide Egypt with much-needed liquidity, potentially easing the path for further currency devaluation and economic reforms.