Egypt pound weakens, debt insurance costs up
Cairo, June 14, 2013
The Egyptian pound weakened on the black market and the country's debt insurance costs hit their highest level since October 2008 as investors grow rattled by Egypt's deteriorating economic indicators.
The pound, which has lost 11 per cent of its value since December, inched slightly lower at a central bank foreign exchange auction.
Egypt has been facing growing fuel shortages, a widening budget deficit and calls for countrywide anti-government protests on June 30, the first anniversary of Mohamed Mursi's election as president.
On Wednesday, MSCI raised concerns about getting money out of Egypt, prompting the stock market's benchmark index to tumble 5.2 per cent to its lowest close since the election of Mursi, candidate of the Muslim Brotherhood.
It regained some of that on Thursday, rising 1.2 per cent.
Thursday's rise in Egyptian debt insurance costs - which hit the highest level since October 2008, soon after the collapse of Lehman Brothers - happened against the background of a broad sell-off in emerging markets and local political concerns.
Five-year credit default swaps rose to 750 basis points on Thursday. In the weeks before Mursi was elected in June 2012 they had reached a peak of 650 basis points, after which they dropped substantially.
The central bank said it sold $38.8 million to banks at its foreign currency auction, with the cut-off price weakening to 6.9835 Egyptian pounds to the dollar from 6.9813 at Wednesday's auction.
The currency dipped much more on the black market, with one dealer in central Cairo quoting 7.58 pounds to buy dollars and 7.63 pounds to sell dollars, compared to 7.48 and 7.51 on Wednesday.
"It will probably keep falling ahead of the June 30 protests," said the dealer.
The central bank introduced the auctions at the end of December to help stave off a currency crisis and thwart a run on the pound. Since then, the currency has lost more than 11 per cent of its value on the official market.-Reuters