Cairo - Arabstoday
Egypt\'s central bank said it will ensure the foreign-exchange market is functioning in an ‘orderly\' manner after reserves fell for an 11th month and as the Egyptian pound trades close to a seven-year low. The regulator \"continues to safeguard an orderly foreign-exchange market, which has been the case since the launch of the foreign-exchange inter-bank market in December 2004,\" it said in a statement. Declines in tourism revenue and foreign investment amid the uprising that ousted President Hosni Mubarak in February have pushed the pound 3.4 per cent lower this year to 6.0083 per dollar. The unrest has also drained $15.9 billion (Dh58.4 billion) from official foreign currency reserves in the past 11 months to $20.15 billion, a 44 per cent plunge. The remarks are an indication the central bank doesn\'t intend to allow the pound to depreciate rapidly for now, according to Jean-Michel Saliba, a London-based economist at Bank of America Merrill Lynch, and Mona Mansour, co-head of research at Cairo-based investment bank CI Capital. Still, \"It will be increasingly untenable to defend the pound next year at the current pace of reserve loss,\" Saliba said yesterday. Article continues below Gradual descent The pound was last devalued in 2003. The currency lost about a third of its value against the dollar that year, including an initial 17 per cent slump on the day of the devaluation in January, followed by a gradual descent to 6.17 by the end of the year. Twelve-month non-deliverable forwards for the currency, which provide guidance to expectations, declined 0.4 per cent to 7.025 a dollar yesterday. Former Central Bank Deputy Governor Hisham Ramez said in June the regulator hasn\'t acted in the foreign-exchange market since February 8 and does not target a level for the pound. The central bank focuses on ensuring there is liquidity in the currency market, he said. \"At the current stage, the central bank has room and tools to support the pound, notably by hiking interest rates or encouraging banks to repatriate parts of their dollar holdings abroad,\" said Alia Moubayed, a London-based senior economist at Barclays Capital. \"However, the longer the uncertainty continues keeping capital flows away, the less the central bank will be able to fend off speculation of a more rapid depreciation.\" The Finance Ministry last month sold its first dollar-denominated treasury-bills, auctioning 1.53 billion pounds in one-year notes at an average yield of 3.87 per cent.