Egypt pound faces new test when Europe opens
Cairo, February 7, 2011
Egypt's banks opened for the first time in a week to lines of customers wanting access to their accounts on Sunday, but the Egyptian pound weakened only modestly after violent protests gave way to political talks.
Currency traders said pressure could grow more acute on Monday when banks outside the region open as well.
The country will face another test of confidence on Monday when the central bank auctions 15 billion Egyptian pounds ($2.6 billion) of short-term Treasury bills, after being forced to cancel auctions last week.
Other parts of the economy gradually began to return to normal for the first time in a week, with ports, transport infrastructure and factories picking up.
Bankers had braced for foreign investors and local business executives to flee the pound on Sunday, but the currency closed at 5.93 to the dollar, having weakened about 1.3 percent since it was last traded on Jan. 27. However, it could fall further on Monday when Europe opens.
"People are trying to get out. There will be more tomorrow, when I think we're going to test 6.00," a London-based trader said.
Egypt's AlexBank, a former big state bank that has been privatized, said after trading it had ended its first open day with a net cash surplus of 4 million pounds ($674,000).
"The way things are looking we do not expect a run on the pound at the moment," Angus Blair, head of research at Beltone Financial, said.
"We think that the prevailing atmosphere is a lot calmer than we might have assumed last week. We assumed some dollarization of the pound but that the system can cope.
"I think that each day is seeing an incremental improvement in stability. If the improvements continue like this, then it would be a near new normal by the end of the week," he said.
The pound had weakened to six-year lows in the two days of trading that followed the first protests on Jan. 25.
The central bank had sought to reassure investors over recent days and its governor, Farouk el-Okdah, gave a rare television interview on Saturday night before the banks opened.
"Of course, over the next week we will have some problems but we will be able to handle them because we have had experience before," Okdah said. "I am confident that the market will be orderly." - Reuters