x Abu Dhabi, UAESunday 23 July 2017

Egypt scales back amount of US dollars in auction

The Egyptian central bank reduced the total of US dollars it is offering on Sunday in a new system of daily currency auctions designed to stave off a financial crisis triggered by a rush to buy foreign currencies.

The Egyptian central bank reduced the total of US dollars it is offering on Sunday in a new system of daily currency auctions designed to stave off a financial crisis triggered by a rush to buy foreign currencies.

Political turmoil over the last month led many investors and private citizens to dump Egyptian pounds, pushing the country's foreign reserves to a precariously low level and prompting the central bank to introduce a system of daily auctions and currency controls.

The central bank had sold US$75 million in each of its four auctions since the system was put in place on December 30, but on Sunday it is only offering $60m.

"It means that the central bank wants other banks to begin making a market in foreign currency," said an analyst based in Cairo.

"The goal is a normally functioning interbank FX market in which the CBE does not need to intervene. By offering less FX, the central bank is encouraging banks to buy and sell FX to each other."

The Egyptian pound has weakened by about 3.7 per cent on the interbank market since the new system was introduced on December 30. Foreign reserves stood at $15 billion at the end of November, less than three months of import cover.

The central bank is expected to release figures for December this week.

 

* Reuters