Egypt’s pound weakened for an eighth day after the central bank sold $60 million at an auction today as part of a policy to conserve currency reserves while politicians race to secure International Monetary Fund aid.
The currency, which has depreciated to an all-time low since the central bank started daily dollar sales Dec. 30, fell 0.5 percent to 6.4819 a dollar as of 1:05 p.m. in Cairo, data compiled by Bloomberg show. The regulator sold the U.S. currency at a cut-off price of 6.4492, according to an announcement on Bloomberg. The government’s dollar bonds were little changed.
The IMF will send a team to Cairo “in the coming weeks” to resume talks on possible support for Egypt, Masood Ahmed, the head of Middle East and Central Asia department at the Washington-based lender, said in a statement yesterday after discussions with President Mohamed Mursi and other officials. Egypt had delayed the agreement on a $4.8 billion loan last month after Mursi suspended tax increases linked to the program.
“There is enough IMF shareholder support and interest in the near-term stability of Egypt that negotiations will likely reach a timely agreement shortly,” BofA Merrill Lynch economists Turker Hamzaoglu and Jean-Michel Saliba wrote in a report yesterday. “We also think authorities are aware of the precariousness of the situation, the need for a rapid IMF loan to stem a large, potentially disorderly, devaluation.”
The central bank said last month the dollar auctions, which cap the amount of the currency each bank can buy daily, seek to conserve foreign-currency reserves after they reached a “critical” level. Net international reserves plunged almost 60 percent since the ouster of Hosni Mubarak in 2011 to $15 billion, enough for about three months of imports.
The weighted average bid price at today’s auction was 6.4497 a dollar, the central bank said. The yield on the government’s 5.75 percent dollar-denominated bonds due April 2020 was little changed at 5.72 percent, according to data compiled by Bloomberg.