Cairo: The Egyptian pound strengthened the most since November against the dollar after the central bank acted to slow declines in the currency amid protests demanding the ousting of President Hosni Mubarak.
"We saw excessive speculative activity so we intervened to stabilise the market," Deputy Central Bank Governor Hesham Ramez said in a telephone interview from Cairo yesterday. He declined to provide further details.
The pound rose 1.3 per cent, the most since November 1, to 5.8780 against the US currency at 3.10pm in Cairo, following a 1.6 per cent decline yesterday to a six-year low.
Pandora's box
Three-month non-deliverable forwards rose 0.8 per cent to 6.18 per dollar. The contracts reflect bets the currency will weaken 4.9 per cent in three months.
"It is positive, but it opens a Pandora's box because it could entice the market to put pressure on the pound and for the Central Bank of Egypt to keep supporting it," said John Sfakianakis, chief economist at Riyadh-based Banque Saudi Fransi.
"We just have to see if the intervention had a directional effect tomorrow and how will markets react."
The government raised most of the 15 billion Egyptian pounds ($2.5 billion, Dh9.37 billion) sought at a debt auction yesterday. Negotiations between opposition leaders and Vice-President Omar Sulaiman on constitutional changes needed to end Mubarak's 30-year rule made "big progress," Egyptian billionaire Naguib Sawiris, a participant in the talks, said.
The nation's stock market remained closed after the benchmark index slid 16 per cent last week.
Egypt's credit risk is falling to the lowest level since anti-government protests began two weeks ago and international borrowing costs are dropping as the nation's biggest political crisis in three decades eases.
The cost of insuring Egyptian sovereign debt declined 1 basis point from yesterday's London close, to 344, according to CMA prices. The yield on the 5.75 per cent bond due in April 2020 rose 5 basis points to 6.26 per cent, down 95 basis points from a record high of 7.21 per cent on January 31, data compiled by Bloomberg show.
