Egypt pound stable after cbank intervention
Cairo, February 9, 2011
The Egyptian pound inched down only slightly in early trade on Wednesday after the central bank stepped in to boost the currency by more than 1 percent in the previous session after it hit a six-year low.
The currency has been falling steadily since the eruption of political protests on Jan 25, and traders and strategists expect more falls. UBS analysts put the potential decline at as much as 25 percent within a month.
Dealers said the market was slow to get started on Wednesday with traders holding back after the central bank intervention in the previous session drove the pound as much as 1.4 percent higher, catching many players out.
On Wednesday, the pound was trading at 5.878 to the dollar compared to 5.876 on Tuesday.
"There is very small volume and very small amounts," said currency dealer at a Cairo-based bank. "I think the banks are being cautious until real activity starts."
"People are a bit scared so far," said a dealer at a second bank.
Traders said the intervention seemed designed both to deter speculators and to restore confidence before the stock market reopens next week. The fate of the pound could play a big role in determining the extent shares are hurt by the crisis.
This allowed the central bank to intervene without dipping into foreign reserves. The trader estimated the size of the intervention at "not less than $1 billion and not more than $1.6 billion."
"This will make people think twice before taking positions on the dollar," the trader said. - Reuters