x Abu Dhabi, UAEMonday 24 July 2017

Egyptian currency takes a pounding

Markets Wrap: The Egyptian pound tumbled to its lowest level in eight years yesterday as violence hit the streets of Cairo and a political crisis engulfed president Mohammed Morsi and the Muslim Brotherhood.

The Egyptian pound also fell to $6.1319 per pound, its lowest level against the dollar since 2004. Shawn Baldwin / Bloomberg News
The Egyptian pound also fell to $6.1319 per pound, its lowest level against the dollar since 2004. Shawn Baldwin / Bloomberg News

The Egyptian pound tumbled to its lowest level in eight years yesterday as violence hit the streets of Cairo and a political crisis engulfed president Mohammed Morsi.

Egypt's markets fell as the Egyptian central bank's foreign reserves declined to $15.03bn in November, the biggest fall in five months. The country's stockpile of international currency has plummeted by more than half since the revolution which ousted Hosni Mubarak last year.

The Egyptian pound also fell to $6.1319, its lowest level against the dollar since 2004.

The EGX30 of Egyptian equities fell 4.6 per cent to 4,838.51, the biggest intraday decline since the "Black Sunday" crash two weeks ago after president Morsi's decree granting him powers above judicial review. Opponents have labelled the move dictatorial.

Credit default swaps on Egyptian government debt, which insure a bond purchaser agains the risk of default, rose 25.8 basis points to 470, the highest level since September.

Political crises of this sort were only natural as a country progresses towards democracy, resulting in large amounts of volatility for investors, said Aziz Unan, a portfolio manager at Renaissance Asset Managers.

"People will probably want to close positions and not carry risk over the weekend," he said. "In a country like Egypt, you're going to see a lot of political noise in the coming weeks, months, perhaps even years."

Political manoeuvring would likely intensify as the IMF board finalises its $4.8bn funding agreement for Egypt, expected to go to a vote on December 19, Mr Unan added.

He added: "The country is going in the right direction but it's not going to be rosy overnight."

In the UAE, the Dubai Financial Market General Index was flat at 1609.63, while the Abu Dhabi Securities Exchange General Index fell 0.1 per cent to 2,674.21.

Elsewhere in the Gulf, all other markets rose. The Saudi Tadawul All-Share Index was closed for the weekend.

ghunter@thenational.ae