Egypt central bank reduces amount offered at dollar auction

Egypt central bank reduces amount offered at dollar auction

The Egyptian central bank reduced the size of its daily foreign currency auctions on Wednesday, a day after Qatar threw Egypt an economic lifeline by sending $2.5 billion in aid to help it get a currency crisis under control.

January 9, 2013 7:28 by Reuters

It the second reduction since the bank introduced a new regime for buying and selling the Egyptian pound after saying Egypt’s foreign reserves had fallen to a critical minimum.

The bank offered $50 million to banks on Wednesday, less than the $60 million offered on Sunday and Tuesday and the $75 million offered at each of four auctions last week. Jan. 1 and Jan. 7 were bank holidays.

It will bring the total amount of foreign currency sold in the auctions to $470 million.

Analysts say the Qatary money gives Egypt breathing space and to prevent a disorderly fall in the currency.

The central bank has spent more than $20 billion in foreign reserves to support the pound since a mass uprising against Hosni Mubarak in early 2011 chased away tourists and foreign investors. Reserves stood at $15 billion at the end of December.

Qatari Prime Minister Sheikh Hamad announced the new aid after meeting President Mohamed Mursi. Qatar had already provided Egypt with another $2.5 billion since the uprising.

The new currency regime, introduced on Dec. 30, also includes a series of measures to dampen demand for foreign currencies, including limiting cash withdrawals from banks.

It came after political turmoil in recent weeks over a new constitution had sent worried Egyptians scrambling to sell local currency.

The central bank said on Saturday that foreign reserves were now at a critical level and could barely cover three months of imports.

The Egyptian pound has weakened by about 4.6 percent on the interbank market since then.