The central bank appeared to intervene indirectly to support the Egyptian pound on Sunday as foreign exchange trade resumed after a week-long suspension due to political unrest, traders and analysts said.
The pound fell as low as 5.9260 against the dollar compared with 5.8550 when banks last traded the currency on Jan. 25. The drop was much less steep than some traders had feared.
Trade was heavy as foreign investors and Egyptians sent money out of the country because of the political instability. Around 400 million Egyptian pounds changed hands in the first 45 minutes, compared with a typical 300 to 400 million pounds for a full day before the crisis, one trader said.
The head of treasury at a Cairo-based bank said there was heavy dollar-buying, but dollars were being provided by two local commercial banks which the central bank has traditionally used to help manage the price of the pound.
"We have not had the central bank intervening directly," he said.
Deputy central bank governor Hisham Ramez indicated last week that the central bank, which had $36 billion of official foreign reserves at end-December, did not want to see a sharp fall of the pound.
"We don't comment on currency matters, but this will not happen," he told Reuters.
Currency traders said pressure on the pound was likely to grow more acute on Monday when banks outside the Middle East opened after the weekend.
"People are trying to get out. There will be more tomorrow, when I think we're going to test 6.00," a London-based trader said.
Hisham Ezz al-Arab, chairman of Commercial International Bank, Egypt's biggest private bank, said the central bank was focused more on providing liquidity to the market than on maintaining the value of the pound.
"The main objective of the central bank or the market makers is to make sure there is liquidity," he told al Arabiya television. "The price is not the objective."
UBS Investment Research predicted on Friday that the pound could fall by as much as 25 percent within a month, which would put it well below 7.00 against the dollar. Credit Agricole suggested on Thursday that the pound could drop 20 percent "over the short term".