Egypt Sells Least Dollars Since Auctions Began as Reserves DropAhmed A. Namatalla
Egypt sold the fewest dollars since the start of foreign currency auctions in December as the government seeks to stem the decline of foreign reserves. The pound was little changed.
The central bank sold $37.8 million to local lenders today at a weighted average price of 6.7082 Egyptian pounds a dollar compared with 6.7043 pounds at the last sale Feb. 7, according to the regulator’s data on Bloomberg. Banks received on average 29.6 percent of the amount they bid for. The pound was little changed at 6.7182 a dollar as of 2:15 p.m. in Cairo, bringing its decline to 7.9 percent since auctions started on Dec. 30.
Egypt’s foreign reserves fell the most in a year in January even after the central bank moved to curb the availability of dollars. The pound’s depreciation helped push consumer prices up 1.7 percent last month, the biggest monthly increase in more than two years, according to government data.
Inflation concerns have prompted the central bank “to turn to a crawling peg of the pound,” Mohamed Kotb, regional asset management director at Cairo-based Naeem Financial, said by phone. “Devaluation will continue but at a slower pace. The central bank should be able to maintain this policy as long as the gap between the official and black markets isn’t big.”
Illegal dealers are charging customers a premium of between 3 percent to 5 percent for dollars, investment bank EFG-Hermes Holding SAE said in a report last week.
While central bank policy seeks to curb unregulated trading, restrictions on foreign currency access are helping “undercut” investor interest in Egypt, U.S. Ambassador Anne Patterson said yesterday. The exchange rate “needs to respect fundamental laws of economics,” she in a speech in Alexandria.
The yield on the government’s benchmark 5.75 percent dollar bonds due in April 2020 advanced two basis points, or 0.02 of a percentage point, to 6.64 percent, according to prices compiled by Bloomberg.
Egyptian treasury bond yields fell at an auction today after the Finance Ministry said last week it will cut sales of long-term debt by 44 percent. The average yield on notes due 2016 retreated five basis points to 14.48 percent, while that on 2023 debt fell four basis points to 16.48 percent. The government raised 2.5 billion pounds at the auction, exceeding its target by 67 percent, according to Finance Ministry data.