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Egypt central bank injects $500 mln into forex market, say reports - Daily News Egypt

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Egypt central bank injects $500 mln into forex market, say reports

CAIRO: Reports indicate that the Central Bank of Egypt (CBE) may be taking a strong stance to protect the Egyptian pound in the face of potential collapse on Wall Street. The Central Bank of Egypt (CBE) reportedly injected around $500 million in the interbank market Thursday, Al-Alam Al-Youm newspaper reported. While monetary experts have long …


CAIRO: Reports indicate that the Central Bank of Egypt (CBE) may be taking a strong stance to protect the Egyptian pound in the face of potential collapse on Wall Street.

The Central Bank of Egypt (CBE) reportedly injected around $500 million in the interbank market Thursday, Al-Alam Al-Youm newspaper reported.

While monetary experts have long predicted that 2008 would see a depreciation of the pound against the dollar, the turbulence seen in the US financial market this past week has threatened to do further damage to the exchange rate and inflict broader pain on the Egyptian economy.

Soon after Daily News Egypt reported that the CBE cautioned banks about adhering to specific regulations governing monetary exchange, reports emerged that the Central Bank infused the interbank market with $500 million.

Reports said CBE officials did not confirm or deny the intervention, stating that such actions could happen as part of the normal CBE management of monetary policy.

Reports published on Thursday said this move was part of an effort to shield the sliding pound against any sudden devaluation.

“The CBE wants to have an orderly effect on the exchange rate, Simon Kitchen, economist at investment bank EFG Hermes, told Daily News Egypt, explaining reasons why the CBE might be inclined to inject liquidity into the market.

In its daily market report, Commercial International Brokerage Company seemed to refute reports of CBE intervention: “The CBE said that Egyptian banks were flush with liquidity, which meant that intervention by the world s central banks by injecting liquidity in financial markets was irrelevant to Egypt.

The Central Bank of Egypt could not be reached for comment.

Regardless of whether the report of the cash infusion is true, the CBE will be keeping a close eye on monetary exchange of the next couple of weeks to prevent unnecessary strain on the value of the pound.

The Central Bank “may be worried about foreign investors being able to get money out quickly, said Kitchen.

The CBE recently sought to reassure investors in the Egyptian market by insuring the necessary liquidity to conduct any foreign exchange.

On Wednesday, the pound continued its slow slide against the dollar, falling by 1.5 piastres over the course of the trading day.

The pound has weakened against the dollar by at least 15 piastres since mid-August alone.

As investors continue to pull their investments out of the Egyptian market, many monetary experts continue to believe that the pound will continue its devaluation into 2009.

Investment Bank EFG-Hermes issued a statement saying it expects the pound to fall to 5.60 on the dollar by the year’s end and to 5.80 by the end of June, 2009.

Another leading Investment Bank, Beltone Financial slightly negatively revised its estimates from earlier this week for the pound, saying that it could slip to 5.55 or 5.60 on the dollar by the end of the year.

Reports of a possible cash injection into the Egyptian markets by the Central Bank comes at a time in which Central Banks around the world are throwing cash into the economies in an effort to stave off a global recession.

The leading central banks cumulatively committed yesterday to injecting $180 billion into money markets to offer some relief.

The US Federal Reserve, as well as the Central Banks in Canada, Switzerland, Japan, and Britain have all signed onto the agreement.

This extra injection of liquidity in the global economy is part of an effort to extend further currency swap arrangements. This will give banks around the world liquidity necessary to weather daily swings on their balance sheets without further riling the market.

These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets, said a joint statement issued by the Central Banks on Thursday.

These actions, both in Egypt and around the world, come at a very dangerous time on Wall Street.

Earlier this week, venerable Investment Bank Lehman Brothers filed for bankruptcy, while Merrill Lynch announced it was being bought out by Bank of America.

Insurance giant AIG will receive an $85 billion bailout from the US government, but wary investors continued the sell-off after the announcement, sending AIG’s stock plummeting by 45.33 percent to $2.05 on Wednesday.

This turmoil marks a period of consolidation on Wall Street, as Morgan Stanley and Wachovia are reportedly in merger talks.

Topics: FJP

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https://www.dailynewsegypt.com/2008/09/18/egypt-central-bank-injects-500-mln-into-forex-market-say-reports/
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