Thousands of anti-Mubarak protesters are seen next to an Egyptian army tank as they take part in a demonstration at Tahrir square in Cairo, Egypt, yesterday. (Photo: AP)

CAIRO, Egypt

Egypt’s central bank stepped in yesterday to halt a sharp fall in the country’s currency, while the stock exchange outlined regulations aimed at thwarting potentially steep losses when it reopens next week as massive anti-government protests batter investor confidence.

The Egyptian pound had dropped to near six-year lows against the US dollar in recent days after banks that had been shuttered for a week because of the demonstrations demanding the president’s ouster reopened. The pound closed yesterday at 5.870 to the US dollar, rebounding sharply from the previous day’s close of 5.9615 to the dollar.

Central Bank Deputy Governor Hisham Ramez told the state-run Middle East News Agency the bank’s intervention resulted in the pound’s strengthening against the US dollar. Ramez said the bank is “constantly monitoring the pound’s movement, and that the bank is ready to intervene at any time” if the circumstances require such a step. He did not say how much the bank had pumped into currency markets.

Economists and analysts said the bank had shown it was ready to step in, but it remained unclear how much support it would, or could provide.

“It could very well be that we this back-and-forth continuing,” said John Sfakianakis, chief economist for the Riyadh, Saudi Arabia-based Banque Saudi Fransi, referring to the currency fluctuation. But, he added, the intervention was a signal that “they’re going to begin to be aggressive about their support for the currency and will definitely take the necessary pre-emptive measures to prevent a fall in the pound.”

“The issue is how long can they sustain this, and whether the reward is higher than the risk,” Sfakianakis said. The risk in this case is how much of the country’s foreign currency reserves they are willing to use to support the pound. Egypt’s central bank held about US$36 billion in foreign currency reserves as of December.

The move comes as Egypt struggles to contain the fallout from more than two weeks of protests that have rattled investors. The pound’s steep losses reflected an outflow of capital many had expected to see as foreigners pulled their money and others converted local currency deposits to foreign currency.

In a bid to bolster confidence, the Central Bank on Monday auctioned off 13 billion pounds (US$2.2 billion) in Treasury bills to raise cash — an offer the Finance Ministry said was significantly oversubscribed. But the buyers were said to be almost exclusively local banks, again underscoring the wariness of the international giants to enter the market at a time of tremendous political flux and uncertainty in the Arab world’s most populous nation.

Separately, the Egyptian Exchange announced measures to be implemented once the market reopens on Sunday after what would be a two-week closure. The new measures included a shortened, three-hour session, and a halt to the pre-market auction in which share prices could easily fall steeply ahead of the official opening of the market.

The exchange’s benchmark index fell about 17 per cent in two days of trading before the market closed o Jan 27, and investors were worried that the first trading session to begin after the protests virtually paralyzed the city and occasionally collapsed into violence would see massive losses.

The exchange said trading would be suspended for 30 minutes if there is a five per cent change in the EGX100, while a 10 per cent change would result in a suspension of activity for a period to be determined by the exchange’s head.

Additionally, price limits on stocks would continue, with trading to be suspended for 30 minutes if a company’s stock price changes by 10 per cent. The share’s price would be frozen until the end of the trading session if there is a 20 per cent change in the price, the exchange said in a statement.

The exchange said the new measures were a reflection of the market’s significance as “an integral part of the investments of Egyptian investments and the productive wealth of the nation.”