Financial commentators are calling for the Central Bank of Egypt (CBE) to intervene to halt further falls of the Egyptian currency against the US dollar. The Egyptian pound (LE) was 5.883 to the US dollar at the end of Sunday, the first day of bank business after a week of closures. On Monday it rose by 0.01 per cent against the dollar to reach 5.874.
"Egypt needs external support and aid. We have to admit that we are suffering from a financial crisis which will last a period of time and cause the pound to drop," said Hani Genena, financial analyst at Pharos Securities. "There is no functioning free market now, the stock market is closed and foreign transfers are limited."
Many people with bank deposits are starting to 'dollarize' due to fears about the fall of the LE, a move that may weaken Egypt's currency.
Genena warned of the possible deterioration of the Egyptian pound in the next few days, saying that if the dollar were to reach LE7 or LE8 "this will be a real disaster".
"The CBE can intervene to encourage the pound by raising interest rates as a kind of stimulus for Egyptian savers but if the situation becomes worse it has more aggressive moves to stop deterioration," he explained.
"The situation has remained stable until now regardless of this slight drop because the supply of dollars is still more than the demand," said a trader.
A meeting of the Monetary Policy Committee (MPC) of the CBE will be held on 10 March to decide interest rates.
The Egyptian pound was trading at 5.883 to the U.S. dollar on Sunday, down from 5.877 when banks were last open on Sunday the previous week.
The pound weakened to 5.96 to the US$ on 8 February, three days before the fall of Hosni Mubarak, from 5.816 before political protests erupted on 25 January, but rebounded after the Central Bank intervened to support it.