Egypt markets 'functioning as normal'

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Queue outside bank in Cairo
Image caption,
There were large queues on Sunday when banks reopened after a week

The Egyptian currency markets are functioning in "a normal fashion," the deputy governor of the Central Bank of Egypt has said.

Hisham Ramez told BBC World the bank had had to intervene earlier in the week after "some speculative moves".

But he said there had been some "good news", with foreign investors returning to take part in a bond auction.

However, President Mubarak's decision to stay in power has cast fresh doubt over Egypt's economy, analysts said.

Mr Mubarak announced late on Thursday night that he will stay in office and transfer all power only after September's presidential election.

This "was the worst message the international investor community could have expected to receive," said John Sfakianakis, chief economist at Banque Saudi Fransi.

Falling pound

Mr Ramez also said he was not concerned about the value of the Egyptian pound.

"We are not actually worried about the market as it is functioning in a normal way now.

"The supply and demand is there."

The pound hit a six-year low against the dollar before the central bank intervened on Tuesday.

Traders estimated that the bank had pumped at least $1bn (£620m) into the system to try to protect the value of the Egyptian currency.

But analysts at UBS have estimated that the pound could decline in value by up to 25% within a month.

Thursday's auction of Treasury bills - effectively short-term loans from investors to the government - raised 1.5bn Egyptian pounds ($255m; £158m).

But the government had to pay a higher premium to borrow the money from the markets. The yield was 11.8% compared with 10.2% before the protests.

Busy day

Egypt's banks were closed for a week before re-opening on Sunday.

There had been concerns about the possibility of a bank run, with investors taking flight and depositors withdrawing their money.

Large queues formed outside some banks, and the deputy central bank governor said it had been an exceptionally busy day. But Mr Ramez said they had been well-prepared.

"On Sunday, there was lots of buying. This was expected and we were ready for it."

"The average volume [of foreign exchange trade] on the Egyptian interbank market is around $350m a day. At that day the volume was around $1.7bn," Mr Ramez said.

He pointed out that the central bank's main role was to ensure that there was sufficient liquidity in the markets and said they had done that.

The stock exchange is still closed and the Egyptian state news agency suggested that authorities had deferred the decision when to reopen it.

"The decision to continue suspending trade on the exchange is possible, but we must wait for the events of tomorrow [Thursday] and Friday, before we make an official announcement," the MENA news agency quoted chairman Khaled Serry Seyam as saying.

The exchange closed after shares plunged during the first few days of protests across the country.

Economic hardship

As the political unrest continues, the cost to the economy is causing concern.

Analysts at the French bank Credit Agricole recently estimated the cost to be $310m (£192m) a day.

Nationwide strikes are threatening to cause more economic hardship and the Norwegian oil company Statoil has said that it is no longer drilling in Egypt.

Meanwhile, the company running the Suez Canal - another vital source of foreign currency - has said that January's takings were 1.6% lower than in December.

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