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Egypt’s Central
Bank warned on Wednesday it was prepared to intervene directly in the
currency market again after purchases on Tuesday strengthened the pound
by more than one per cent.

The Egyptian pound
has been falling steadily since the eruption of political protests on
January 25, and traders and strategists expect more losses. UBS
analysts put the potential decline at as much as 25 per cent 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 was quiet and orderly.

He said the Central Bank was concerned that the market be based on “real supply and demand.”

On Wednesday, the
pound was trading at 5.8775 to the dollar compared to 5.876 after
Tuesday’s intervention, which boosted the currency as much as 1.4 per
cent after it hit a six-year low.

Dealers said traders were holding back on Wednesday after the intervention caught many players out.

“There is very
small volume and very small amounts. I think the banks are being
cautious until real activity starts,” said a currency dealer at a
Cairo-based bank.

“People are a bit scared so far,” said a dealer at a second bank.

Egypt’s banks and
treasuries reopened on Sunday after shutting 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
plunged by 16 per cent in the two days the exchange was operating after
anti-government protests erupted on January 25.

Egypt’s financial
regulator said the stock exchange will suspend trade for a half hour if
its broad 100-share index declines by 5 per cent after it reopens, and
even longer if it falls by 10 per cent.

Asked if he was
concerned about the resumption of share trading, Mr. 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 billion. This will make people think
twice before taking positions on the dollar,” the trader said.