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.