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Egyptian pound weaker despite Central Bank intervention

Egypt's currency edged weaker on Thursday, but many banks were holding back from large dollar purchases after Tuesday's intervention from the central bank, dealers said

Reuters, Thursday 10 Feb 2011
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"Trade is very slow," said a dealer at a Cairo bank, adding that state-controlled banks had been selling dollars to support the Egyptian pound EGP.

The Egyptian pound EGP= had been falling steadily since political protests broke out on Jan 25, and many traders and strategists expect more losses. UBS analysts put the potential decline at as much as 25 percent within a month.

The pound was trading at 5.887 to the U.S. dollar. marginally lower than Wednesday's close of 5.8775 but stronger than the six-year low of 5.960 reached before the central bank intervention on Tuesday.

Egypt's central bank said on Wednesday it was prepared to intervene directly in the currency market again after Tuesday's intervention if it sees the need.

Traders said the central bank had intervened without dipping into foreign reserves, and one trader estimated the size of the intervention at "not less than $1 billion and not more than $1.6 billion."

The intervention boosted the currency as much as 1.4 percent.

One trader estimated that volume on the interbank currency market on Wednesday had fallen to about $300 million from $1.6-1.7 billion on Sunday and $1 billion on Monday before the intervention.

Traders put volume in normal times at $300-400 million.

The central bank is due to announce the results later today of an auction of 3.5 billion Egyptian pounds in 182-day treasury bills, its second since political protests forced Egypt's banks and treasury rooms to close for five days last week.

Egypt's central bank accepted fewer bids than treasury bills it offered on Monday in an oversubscribed auction that received no foreign bids, suggesting demand has been knocked lower by two weeks of political turmoil.

 

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