* Dealers say traders holding back from market
* C.bank says worst is over in currency market
(Adds closing price, trading volume, NDF comment)
By Patrick Werr
CAIRO, Feb 9 Egypt's central bank warned on
Wednesday that it was prepared to intervene directly in the
currency market again after purchases on Tuesday strengthened
the pound by more than 1 percent.
The Egyptian pound EGP= has been falling steadily since
political protests broke out on Jan 25, and traders and
strategists expect more losses. UBS analysts put the potential
decline at as much as 25 percent within a month.
"We will intervene when we see the market is not orderly. If
it is not, we will use our tools," Deputy Governor Hisham Ramez
said by telephone, adding that the market so far on Wednesday
had been quiet and orderly.
He said the central bank was concerned that the market be
based on "real supply and demand".
"Yesterday the market was more speculative, so we came in,"
The intervention boosted the currency as much as 1.4 percent
after it briefly hit a six-year low. On Wednesday, the pound
closed at 5.8775 to the dollar, only marginally weaker than
5.876 at Tuesday's close.
Dealers said traders were holding back on Wednesday after
the intervention caught many players out.
"There is very small volume and very small amounts," said a
currency dealer at a Cairo-based bank. "I think the banks are
being cautious until real activity starts."
One trader estimated that volume on the interbank currency
market on Wednesday had fallen to about $300 million from
$1.6-1.7 billion on Sunday and $1 billion on Monday before the
Traders put volume in normal times at $300-400 million.
"People are a bit scared so far," said a dealer at a second
Egypt's banks and treasuries reopened on Sunday after having
shut their doors for a week, and traders said the intervention
seemed designed both to deter speculators and to restore
confidence before the stock market reopens next week.
The fate of the pound could also play a big role in
determining the extent to which shares are hurt by the crisis.
Analysts have warned of a renewed sell-off by spooked
investors once trading resumes on the stock exchange after a
two-week closure. The benchmark index .EGX30 plunged by 16
percent in the two days the exchange was operating after
anti-government protests erupted on Jan. 25.
Egypt's financial regulator said the stock exchange will
suspend trade for a half hour if its broad 100-share index
.EGX100 declines by 5 percent after it reopens, and even
longer if it falls by 10 percent. [ID:nLDE7171C4]
Asked if he was concerned about the resumption of share
trading, Ramez said: "I think we passed through the toughest
time when we saw the bank closure."
Traders said the central bank had intervened without dipping
into foreign reserves, and one trader estimated the size of the
intervention at "not less than $1 billion and not more than $1.6
"This will make people think twice before taking positions
on the dollar," the trader said.
A currency dealer in London said non-deliverable forwards
were still better bid than offered on Wednesday.
"Banks and corporates are trying to hedge their exposures,
and everybody is waiting to see what Sunday will bring, when
outflows are expected," he said.
(Reporting by Patrick Werr; editing by Hugh Lawson)