The median overnight interbank rate on Egypt's pound slipped on Sunday to the lower of end of a new central bank band for overnight rates that bankers said would give a clearer indication of monetary policy direction. The Central Bank of Egypt said late on Thursday it was introducing overnight deposit and lending facilities to keep overnight rates within limits set by the bank.
It set the overnight deposit rate at 9-1/2 percent and the overnight lending rate at 12-1/2 percent. On Sunday, the first day of trading after the new system was announced, the median overnight rate was 9-3/4 percent, compared to 10-3/4 percent on Thursday before the band was announced.
Some bankers said dealing was slow on Sunday as traders got used to the new system, but most said it would help banks manage their liquidity and said it would also help the central bank more effectively tailor monetary policy to economic conditions.
"(The central bank) wants to stabilise rates between banks, and also stabilise the customer rates at a certain level," said one banker, adding that banks would be able to set customer deposit and lending rates against the band.
Overnight rates have fluctuated freely based on supply and demand, but active intervention by the central bank mainly through reverse repo auctions have kept rates between 9-1/2 to 12-1/2 percent - with a few exceptions - for many months.
Occasionally rates have fallen below or climbed above those levels if, for example, a maturing reverse repo was not renewed leaving excess liquidity in the market or if the central bank drained funds by taking more funds than expected at auction.
Dealers said a reverse repo matured on Sunday worth more than 4 billion pounds but was not renewed. They said rates would have fallen sharply if the band had not been in place.
Thursday's decision to launch the new band was announced after a meeting of a newly created monetary policy committee. The government has said the committee will make monthly statements of monetary policy for the sake of transparency.
Four out of nine banks contacted by Reuters on Sunday had dealt in overnight money, at rates of between 9-1/2 and 10 percent, compared to Thursday's 10-1/4 to 11-1/8 percent.
One-week rates ranged between 10 and 10-1/2 percent, compared to Thursday's 10-1/2 percent to 11-1/2 percent.
Overnight CAIBOR was steady at 10.5476 percent. One-week CAIBOR rose to 10.7649 percent from Thursday's 10.7589 percent.
By 1100 GMT, the pound was at 5.7975 to the dollar, almost unchanged on Thursday's weighted average of 5.7974 pounds.
Comments
Comments are closed.