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Unrest sends Egypt pound to weakest since Jan 2005

Traders say the pound could break through to LE6 to the dollar as investors run for cover

Reuters, Tuesday 22 Nov 2011

Egypt's pound fell to its weakest against the dollar since January 2005 on Tuesday as mass protests against army rule prompted the cabinet to tender its resignation and threw polls into doubt, giving a fresh jolt to a shaky business climate.

The Central Bank of Egypt (CBE) has sought to defend the currency during the nine turbulent months since the overthrow of President Hosni Mubarak, but now traders said the pound could soon break through 6 to the dollar as investors run for cover.

They said demand for dollars among local companies and individuals had grown with the street clashes that have left 36 people dead since Saturday. Voting in the three-phase poll for the lower house of parliament is due to start on 28 November.

"The pound is under a lot of pressure due to the political unrest," said one Cairo-based trader. "Till now the CBE is still defending the pound but I ask myself to what extent and at what cost? The coming few days and weeks will reveal the answer."

The pound touched 5.992 to the dollar compared to 5.8 before the January uprising against Mubarak. Central bank foreign reserves tumbled to $22.1 billion last month from $36 billion in January.  

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