Bloomberg News

Egypt Pound Decline Accelerates After Ramez Attack, Moody’s Cut

February 13, 2013

The Egyptian pound weakened the most this month as domestic security deteriorated and Moody’s Investors Service cut the country’s credit rating because of political turmoil.

The average price of dollars at auction today fell 0.2 percent compared with a sale two days ago, the biggest depreciation since Jan. 31. The central bank sold $38.9 million at an auction of the U.S. currency at a weighted average price of 6.7188 pounds, according to its data on Bloomberg. Banks received on average 23.8 percent of the amounts they bid for, the data show, the lowest ratio this month.

Masked gunmen attacked Central Bank Governor Hisham Ramez’s car this morning, killing a police guard. The incident highlights the lack of security two years after the uprising that ousted Hosni Mubarak. Ramez wasn’t in the vehicle, he said by phone today. Moody’s cut Egypt’s rating yesterday to B3, six levels below investment grade, citing civil unrest and last month’s biggest drop in foreign reserves in a year.

“We’re at a point where the central bank governor’s car is getting attacked, which shows how serious the security problem is here,” Amr Seif, chief dealer at Piraeus Bank Egypt, said by phone. “This means we’re not likely to see sustained foreign investment inflows in the near future, even if we get an IMF deal, because we need a complete restructuring of security and the economy.”

The unrest “complicates” the North African country’s ability to secure and implement a $4.8 billion International Monetary Fund loan accord needed to build investor confidence after reserves fell to $13.6 billion, Moody’s said.

The pound, whose movement in the interbank market was capped by the central bank last week to 1 piaster above the weighted average of the most recent auction, retreated 0.2 percent to 6.7288 a dollar as of 2:04 p.m. in Cairo, according to National Bank of Egypt prices, bringing its loss since the currency auctions started to 8 percent.

The yield on the benchmark 5.75 percent dollar-denominated bonds due in April 2020 retreated three basis points, or 0.03 of a percentage point, to 6.78 percent, according to data compiled by Bloomberg. The yield had climbed 15 basis points yesterday after Moody’s decision.

To contact the reporter on this story: Ahmed A. Namatalla in Cairo at anamatalla@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net


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