Egypt steps in to halt soaring value of pound

Central Bank buys large amounts of dollars after US currency loses 200 points in early trading.
Egypt steps in to halt soaring value of pound
By Wael Gamal
Thu 25 Oct 2007 04:34 PM

The Central Bank of Egypt bought large amounts of US dollars on Thursday after the American currency lost about 200 points to 5.500 Egyptian pounds in early interbank trading, bankers said.

Central Bank sub-governor Atef Ibrahim, when asked about the report, said: "No comment."

The bankers said foreigners were buying Egyptian pounds after Finance Minister Youssef Boutros-Ghali was quoted on Wednesday as saying that the US dollar was expected to shed over 4% against the pound by the end of 2007.

The bankers said that after the intervention the pound recovered to its previous levels. The last trade on the interbank market was at 5.5260 pounds, down from Wednesday's weighted average of 5.5221.

"The central bank bought about $500 million till 1200 local time [1000 GMT], preventing further appreciation of the pound," one banker told Reuters.

Another dealer said: "Foreigners were driven by the statements of the Egyptian finance minister that the pound will continue appreciating."

In an interview with the state-run weekly magazine Al-Mussawar, Boutros-Ghali said: "I expect the dollar to decline against the pound to settle at around 5.30 pounds [to the dollar] before the end of the year.

Data from the interbank forex trading room managed by the Central Bank showed very high levels of dollar/pound trading at a total of $1.176 billion on Thursday, compared with $132 million on Wednesday.

The pound has gained 2.8% against the greenback over the past two months and the dollar's slide accelerated after the US Federal Reserve slashed interest rates by 50 basis points in September.

The main factor has been the global decline of the dollar, combined with high interest rates in Egypt, a booming tourist sector and high oil and gas prices.

But government officials say that Egyptian exports should not suffer because the pound has not appreciated against the euro or the pound sterling. European countries are Egypt's biggest trading partners and the main source of tourists. - Reuters

For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.