Egyptian central bank says happy with currency's value

Head of reserves management hails the slowing depreciation of the pound against the dollar but says bank will defend it against speculators

The head of foreign reserves management at Egypt's central bank said on Monday he was happy with the Egyptian pound's value and that the bank was prepared to defend the currency against speculators.
Demand for the pound fell sharply after last year's popular uprising chased away tourists and foreign investors, two of Egypt's main sources of foreign exchange. But since then, the currency has fallen by only 4.5 per cent to LE6.09 against the U.S. dollar.
"We're very comfortable with the exchange rate right now. We think that more or less reflects what the market thinks about the Egyptian pound," Deputy Governor Nidal Assar told a business conference.
"We are ready to interfere whenever we see inappropriate actions or attacks toward the Egyptian pound," he said. "When we see that the currency has an attack from such speculators, we do interfere, and we don't allow it."
The central bank has run through more than $20 billion of its foreign reserves since the uprising to plug a widened balance of payments gap. Reserves now stand at $15.1 billion.
"In our dictionary, speculation means dollarisation, when people actually, simply, are buying the currency and selling it after a few days," Assar told the conference organised by Egyptian investment bank Beltone.
Since its appointment last month, Egypt's new government has been working to lure investors to get the economy back on track after more than a year and a half of political turmoil.
So far it has attracted new investments and pledges of billions of dollars in aid from foreign governments. The economy has grown by an anaemic 2 per cent since last year's popular uprising.
Assar said foreign investors were gradually returning to the country since a newly elected president took office in June and a government was appointed in August.
"Recently, we're starting finally to see inflows," he said. We're starting to see the same names that in 2010 had $12 billion, investing in bonds, bills and equities. We've started to see a lot of investors interested to come for FDI (foreign direct investment), for different types of investments."
Interest rates on the Egyptian government's debt have fallen from historic highs in recent weeks as optimism grows that it will secure help for a struggling economy from the International Monetary Fund and other foreign donors.
"Today I think around 10 per cent off the auction or more was covered by foreigners," he said. "They're starting to build up their profile so they can penetrate (the market)."