Egyptian pound hits 6-year low
Cairo, February 7, 2011
The Egyptian pound hit a 6-year low on Monday after banks reopened their doors to international deals.
The stock exchange, whose doors have been shut since January 27, has said it will remain closed through Tuesday at least.
The pound traded as weak as 5.951 to the dollar on Monday, a new six-year low and down 0.4 per cent from Sunday's close and 1.7 per cent from Thursday's, as foreign investors and Egyptians placed orders to sell the currency after a week-long closure.
Egypt's London-listed stocks were, however, all in positive territory and the cost of insuring Egypt's debt fell in the five-year credit default swap market.
The pound was also looking more resilient than some people had expected. Traders said state-controlled banks seemed to be selling dollars to support the local currency.
'Things are stable. I can't say they're good, but they're not collapsing,' said a trader at a Cairo-based bank. 'There has been no central bank intervention. I don't think it will do so unless the pound reached 6.1 or 6.2 to the dollar.'
The currency had closed at 5.855 on January 27, before the week-long closure as protests erupted against President Hosni Mubarak's rule.
Egyptian banks, which are operating reduced hours, opened at 10 am (0800 GMT) and will close at 1:30 pm.
The country also faces a test of debt market confidence on Monday when the central bank seeks to sell over EGP 15 billion ($2.53 billion) of Treasury bills. Last week it was forced to cancel auctions.
One trader said his bank had not received a single bid from a foreign investors for the bills, but expected local banks would have enough funds to cover the amount.
'Banks are well capitalised. So far it doesn't look so bad,' he said.
Egypt's central bank said it would auction EGP 8 billion in 91-day bills, EGP 5 billion in 182-day bills and EGP 2 billion in 273-day bills for settlement date on Tuesday. The auction 'is large because they need truckloads of money now,' the trader said.
'I am expecting yields of 12-13 per cent' compared to 9.5 for 91-day bills and 10.5-10.6 for the longer T-bill maturities.
Dina Ahmad, emerging markets strategist at BNP Paribas in London, said: 'We are currently expecting for 3-months around 11.20 per cent and for 9 months around 12. I do not think there will be much international interest - foreign investors will still be quite hesitant at this stage.'
Banks said they had been having problems calculating their reserves, which made it hard for them to judge how many T-bills they should buy, another treasury dealer in Cairo said.
Banks on Sunday opened for the first time in a week to lines of customers wanting access to their accounts.
The central business district was palpably more relaxed early on Monday, with traffic police and soldiers returning smiles and much more fruit and vegetables on the stands, but there was no sign yet of progress in talks with an opposition that wants Mubarak's government to resign.
The central bank has said it was allowing bank customers to withdraw up to EGP 50,000 in cash and the equivalent of up to $10,000 in foreign currency.
But on Monday, one customer in the upscale neighbourhood of Zamalek was told by his bank that it was running out of cash and would not be able to give him the $5,000 he was asking for.
Other parts of the economy gradually began to return to normal on Sunday for the first time in a week, with ports, transport infrastructure and factories gearing up.
Egypt's biggest listed firm on the state's benchmark stock index, Orascom Construction, said it had resumed on Sunday construction work in over 50 locations, which represents around 90 per cent of the company's operations.
GB Auto, Egypt's biggest listed vehicle assembler, said on Monday it too had resumed operations nationwide.-Reuters