Egypt pound trades at weakest in 6 years
Cairo, March 24, 2011
The Egyptian pound slid on Thursday to its lowest level since January 2005, but later regained some ground after foreign investors bought pounds to invest in the stock exchange, bankers said.
The pound weakened to as low as 5.9615 to the US dollar from 5.952 on Wednesday, but during the last 15 minutes of trade pulled back to 5.950.
"It seems foreign investors are buying EGP to enter the stock exchange," said a currency trader at a Cairo-based bank.
Another Cairo-based banker said many of the purchases were by Gulf-based investment funds who wanted pounds to invest in local shares.
The central bank, which pushed the pound down in a large intervention on February 8, said it was not behind the pound's last-minute strengthening.
"We did not intervene," Deputy Governor Hisham Ramez said by telephone.
Analysts had said Egypt's poor economic outlook, weak currency and political uncertainty after two months of political unrest may drag down share prices by as much as 30 percent in coming weeks.
They had also forecast the currency will come under pressure in the coming days as foreign investors sell shares on the Egyptian stock exchange, which reopened yesterday after political unrest had kept it closed for more than seven weeks.
But on Thursday, the broad index confounded many expectations when it rose 0.8 percent. The benchmark index fell 3.7 percent.
Luis Costa, head of CEEMEA debt and forex strategy at Citi, said early on Thursday that he believed the central bank would allow the pound to depreciate slowly.
"I believe this is heading to 6 per dollar in the near future," he said. "At this point they see no point in leaning against the wind and depleting FX reserves." - Reuters