June 5, 2017 / 11:21 AM / 3 months ago

UPDATE 3-Some Egyptian banks halt dealings with Qatari banks after diplomatic rupture -bankers

(Adds central bank comment)

By Asma Alsharif

CAIRO, June 5 (Reuters) - Some Egyptian banks halted dealings with Qatari banks on Monday after Cairo's announcement that it had cut diplomatic relations with Qatar for supporting terrorism, though Egypt's central bank urged banks to continue dealing in Qatari riyals.

The decision to cut ties, announced in Monday's early hours, was coordinated with similar moves by Saudi Arabia, the United Arab Emirates and Bahrain. Egypt did not say if the measure included a suspension of trade with Qatar, and the Trade Ministry did not immediately respond to questions on this.

Four bankers told Reuters that they had halted transactions with Qatari banks based on internal orders from management at their banks, though they had not frozen the opening of letters of credit required for imports.

Some banks have stopped accepting Qatari currency while others are halting some treasury transactions, the bankers said.

Bankers at three other lenders said they had not received any orders and that it was business as usual so far.

The central bank said later in a statement that it had not issued instructions to halt transactions being made in Qatari riyals and urged banks to accept the currency.

"The Qatari riyal is one of the official currencies which is used in transactions without any restrictions on its circulation or transfer to Egyptian pounds or to any other foreign currency," the statement said.

There had been no official communication to banks from the Central Bank of Egypt on the split, the bankers said.

As well as severing relations, Egypt announced the closure of its air space and seaports for all Qatari transportation and said this was to protect national security.

The sentiment against Qatar was shared by Egyptian business tycoon Naguib Sawiris, who called on Egyptian businessmen to withdraw their investments from Qatar and halt business dealings with the Gulf state, his spokesperson said on Monday. (Additional reporting by Arwa Gaballa; Editing by Giles Elgood and Mark Heinrich)

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