Egypt pound ends down 1.3 percent

The Egyptian pound fell on Sunday when trade resumed after a week-long suspension due to political unrest, but the drop was less sharp than many traders had feared as the central bank appeared to support the currency.
The pound closed at 5.9300 against the dollar, its lowest finish since January 2005, compared with 5.8550 when banks last traded the currency on January 25.
Trade was heavy as some foreign investors and Egyptians sent money out of the country because of the political instability. Trading volume totalled about $1 billion, double or triple the normal amount on a Sunday, one dealer estimated. The head of treasury at a Cairo-based bank said there was heavy dollar-buying, but dollars were being provided by two local commercial banks which the central bank has traditionally used to help manage the price of the pound.
"We have not had the central bank intervening directly," he said. Deputy central bank governor Hisham Ramez indicated last week that the central bank, which had $36 billion of official foreign reserves at end-December, did not want to see a sharp fall of the pound. "We don't comment on currency matters, but this will not happen," he told Reuters.
Currency traders said pressure on the pound could grow more acute on Monday when banks outside the Middle East opened after the weekend. "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.
Hisham Ezz al-Arab, chairman of Commercial International Bank, Egypt's biggest private bank, said the central bank was focused more on providing liquidity to the market than on maintaining the value of the pound.
"The main objective of the central bank or the market makers is to make sure there is liquidity," he told al Arabiya television. "The price is not the objective."
UBS Investment Research predicted on Friday that the pound could fall by as much as 25 percent within a month, which would put it well below 7.00 against the dollar. Credit Agricole suggested on Thursday that the pound could drop 20 percent "over the short term". The non-deliverable forwards market has been showing increasing expectations for long-term depreciation of the pound; one-year forwards were at 6.63 late last week, compared to levels around 6.25 in mid-January.
Some traders think the pound may stabilise after a few days, however. A Dubai-based trader said he was expecting about $7 billion to $9 billion to flow out of Egypt over time as a result of the political unrest, which the central bank could handle fairly comfortably given the size of its reserves. The risk to the pound is a much greater-than-expected outflow of money, which could occur if the political crisis drags on, he said.