The Egyptian pound weakened to a record after the nation’s third dollar auction this week as Bank of America Merrill Lynch said it may be too early to determine when the exchange rate will stabilize.
The pound depreciated 0.3 percent to 6.6028 a dollar after banks bought $72.9 million at a central bank foreign-exchange auction, according to data compiled by Bloomberg. The pound has weakened 6.3 percent since the central bank started the dollar sales on Dec. 30. The auctions limit the amount of dollars each bank can buy daily in order to conserve foreign reserves.
The government needs to reach a loan agreement with the International Monetary Fund before parliamentary elections if it wants to curb speculation that the pound will depreciate further, Jean-Michel Saliba, London-based economist at BofA Merrill Lynch, said by phone after today’s auction. “It’s too early to say when will the exchange rate stabilize,” he said. The government hasn’t yet set a date for the vote.
The currency won’t weaken beyond about 6.7 pounds a dollar this quarter before stabilizing, Hisham Ramez, who is set to take over as central bank governor next month, forecast one day before his nomination last week, according to three people on his Jan. 9 call with investors and analysts. “We will get to the stage of stabilization in the exchange rate soon,” Ramez told Al Arabiya satellite channel in comments aired yesterday.
Egypt expects the IMF to send a technical team to Cairo within three weeks to resume talks on a $4.8 billion loan, presidential spokesman Yasser Ali said Jan. 8. The government delayed the agreement last month after President Mohamed Mursi suspended tax increases linked to the program. Egypt’s foreign reserves have plunged almost 60 percent to $15 billion since the 2011 uprising that ousted Hosni Mubarak.
The yield on the government’s 5.75 percent dollar bonds due April 2020 rose two basis points, or 0.02 percentage point, to 5.55 percent at 2:54 p.m. in Cairo, according to data compiled by Bloomberg.