Egypt fights to prop up pound as anxiety grows

Updated 04 January 2013
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Egypt fights to prop up pound as anxiety grows

Egypt dipped deeper into its rapidly shrinking currency reserves yesterday, fighting to slow a sliding pound which is likely to push up inflation and risks reigniting popular unrest.
Economists warned that the central bank had little room left for maneuver with its readily available foreign currency reserves enough to cover just over two months of Egypt's import bill, well below levels in many of its emerging market peers.
The pound slid further yesterday at the central bank's fourth auction of foreign currency, with $ 74.9 million sold to banks at a cutoff price of 6.386 pounds, weaker than Wednesday's 6.351 to the dollar.
Egypt's currency has lost about 10 percent against the dollar since the start of 2011, just before the Arab Spring unrest spread to the country. But about a third of that has come this week alone, since the central bank began auctioning $ 75 million a day out of its reserves on Sunday.
“The pound is extremely vulnerable,” said Raza Agha, chief economist for the Middle East and Africa at VTB Capital. “This auction system they should have done months ago to stem the decline in reserves rather than using them to defend an arbitrary level of the pound, which has gotten them to where they are now.”


Saudi Arabia, Russia and China give EU trade reforms thumbs down at WTO

Updated 6 min 56 sec ago
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Saudi Arabia, Russia and China give EU trade reforms thumbs down at WTO

  • China is suing US and EU at WTO
  • Kingdom warns new rules are concerning

The EU’s new rules against countries dumping cheap goods on its market got a rough ride at a World Trade Organization meeting, where China, Russia and Saudi Arabia led a chorus of disapproval, a trade official said on Thursday.

The EU, which is in a major dispute with China about the fairness of Chinese pricing, introduced rules last December that allow it to take into account “significant distortions” in prices caused by government intervention.

A Chinese trade official told the WTO’s anti-dumping committee that Beijing had deep concerns about the new methodology, saying it would damage the WTO’s anti-dumping system and increase uncertainty for exporters, an official who attended the meeting said.

China argued that the concept of “significant distortion” did not exist under WTO rules, and the EU should base its dumping investigations on domestic prices in countries of origin, such as China.

The EU reformed its rules in the hope they would allow it to keep shielding its markets from cheap Chinese imports while fending off a Chinese legal challenge at the WTO.
China said that when it joined the WTO in 2001, the other member countries agreed that after 15 years they would treat it as a market economy, taking its prices at face value.

But the US and the EU have refused, saying China still subsidises some industries, such as steel and aluminum, which have massive overcapacity and spew vast supplies onto the world market, making it impossible for others to compete.

China is suing both the US and the EU at the WTO to try to force them to change their rules.

Legal experts say the dispute is one of the most important in the 23-year history of the WTO, because it pits the major trading blocs against each other with fundamentally opposing views of how the global trade rules should work.

In the WTO committee meeting, Saudi Arabia said the new rules were very concerning, and it challenged the EU to explain how EU authorities could ensure a fair and objective assessment of “significant distortion.”

Russia said the EU rules violated the WTO rulebook and certain aspects were unclear and created great uncertainty for exporters. Bahrain, Argentina, Kazakhstan and Oman also expressed concerns.

But a US trade official said the discussion showed that appropriate tools were available within the WTO to address distortions affecting international trade.