Egypt Pound Slumps Most This Week After Violence Escalates

The Egyptian pound weakened the most this week after a currency auction and amid escalating unrest since the second anniversary of the country’s uprising. The nation’s dollar bonds fell for a third day.

The pound retreated 0.4 percent to 6.6858 a dollar in interbank trading as of 2:10 p.m. in Cairo, according to prices compiled by Bloomberg. The regulator sold $47.9 million at a cut-off price of 6.6525 a dollar, according to its data on Bloomberg. Lenders received about 27 percent of what they sought today.

The currency has weakened 7.4 percent, the most among emerging-market currencies, since the central bank started the auctions on Dec. 30 to limit banks’ access to dollars. The central bank limited the currency’s decline in the previous two years to 6.2 percent. Net international reserves have tumbled by almost 60 percent during the period to $15 billion in December, a level the regulator called “critical.”

“It’s becoming more apparent that the central bank’s capacity for defending the pound is becoming limited as reserves continue to fall,” Mona Mansour, chief economist at Cairo-based CI Capital Holding, said by phone. “If unrest persists we’re sure to see the pound decline even further.”

More than 50 people died in clashes between police and protesters since protests started Jan. 25. The violence has deepened a political crisis between the Islamist government of President Mohamed Mursi and its secular opponents as the country seeks to finalize a $4.8 billion loan agreement with the International Monetary Fund. Thousands marched in Suez Canal cities last night in defiance of a curfew and state of emergency declared in their region. The nation’s biggest opposition bloc rejected yesterday’s round of talks with the government.

The yield on the government’s 5.75 percent dollar-denominated 2020 bonds rose six basis points, or 0.06 of a percentage point, to 5.76 percent, taking its three-day advance to 20 basis points, according to prices compiled by Bloomberg. That’s the highest level on a closing basis in more than three weeks.

Before it's here, it's on the Bloomberg Terminal.