Egypt Pound Depreciation Speeds Up at Auction After Violence

The Egyptian pound’s depreciation accelerated at a dollar auction today after dozens died in clashes as the country marks the second anniversary of the uprising that toppled Hosni Mubarak.

The Arab country’s central bank sold lenders $48.1 million at a cut-off of 6.6235 a dollar, according to central bank data on Bloomberg, representing a 0.3 percent retreat from the last sale Jan. 22. It had dropped 0.2 percent in that auction. The pound, which has declined at each of the regulator’s 14 U.S. currency auctions, dropped by the same rate in the interbank market to 6.6565 as of 1:09 p.m. in Cairo.

The dollars sold today are the fewest since the central bank started the auctions Dec. 30. The regulator said at the time it’s seeking to conserve foreign currency reserves, which had fallen to “minimum and critical” levels since the unrest began in January 2011. Banks purchased $938.4 million at the auctions and the Egyptian pound fell 7 percent, the most over a comparable period since the start of the revolt.

“Political instability and concerns that it may further delay the International Monetary Fund loan are creating pressure on the pound,” Amr Seif, chief dealer at Piraeus Bank Egypt, said by phone. “As long as instability persists and there’s a lack of visibility on inflows of foreign currency, we’re likely to see the pound drop more.”

Deadly Clashes

At least 32 people died yesterday in clashes between security forces and protesters after a courted sentenced 21 people to death for the killing of at least 70 soccer fans during a stadium riot in February. That followed nine deaths a day earlier in fighting on the anniversary of the revolution. Egypt’s National Defense Council said it may declare a state of emergency and a curfew in parts of the country to curb the violence.

Egypt, which reached a preliminary agreement with the IMF for a $4.8 billion loan in November, has seen the political unrest since then delay final approval by the lender’s board. An IMF team is to return to Cairo within two weeks, Prime Minister Hisham Qandil said Jan. 24.

Egypt sold its target 4 billion pounds ($601 million) of treasury bills at a separate auction today, with the nine-month yield increasing the most in three weeks. The Finance Ministry sold 3.5 billion pounds of 266-day securities at an average 14.02 percent, an increase of 33 basis points, or 0.33 of a percenage point, from last week. The yield on three-month notes retreated six basis points to 12.83 percent, according to central bank data.

The yield on the benchmark 5.75 percent dollar bonds due in April 2020 advanced three basis points to 5.6 percent on Jan. 25, according to prices compiled by Bloomberg.

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