May 14 (Bloomberg) -- 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.
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