The Egyptian pound fell the most in 16 months after the central bank held a currency auction for food imports and as the nation gears up for a presidential election.
The pound lost 0.7 percent, the most since January 2013, to a record 7.1049 a dollar in the interbank market, where its movement is controlled by the central bank. Today’s $1.1 billion auction was held to help clear a backlog of demand by importers for staple foods and to secure their availability of that food “over the coming period,” the regulator said in a statement.
The currency has fallen 2.2 percent in 2014, the third-worst performance among 13 regional peers tracked by Bloomberg. Three interest-rate cuts and two stimulus packages worth the equivalent of $8.5 billion have failed to revive Egypt’s economy, with growth remaining under 2 percent since President Mohamed Mursi was ousted in July. Egyptians will vote for a new leader on May 25. Abdel-Fattah Al-Seesi, the former army chief who led Mursi’s overthrow, is widely seen as the front-runner.
“The weakening of the pound is most likely aimed at a controlled convergence toward a more realistic reflection of the current economic situation and real FX inflows,” Philippe Dauba-Pantanacce, senior economist for the Middle East and Turkey at Standard Chartered Plc in London, said by e-mail. “The central bank has been trying to control the pound’s evolution, and in doing so, has spent a lot of precious currency reserves over the past three years.”
Annual inflation fell to 8.9 percent in April, while foreign reserves stood at $17.5 billion, official figures show. That compares with more than $36 billion before political turmoil that erupted in January 2011.
The government’s benchmark 5.75 percent Eurobonds due in April 2020 advanced for a second day, sending the yield down three basis points to 5.19 percent as of 4:59 p.m. in Cairo.
Expatriates will start voting in the presidential election tomorrow. The most recent government reports for economic growth are for the quarter ended in December 2013.
To contact the reporter on this story: Ahmed A. Namatalla in Cairo at email@example.com