Central Bank cancels currency auction, to announce new mechanism Monday

Central Bank cancels currency auction, to announce new mechanism Monday

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Mon, 04/02/2013 - 15:49

Egypt's central bank cancelled an auction of foreign currency on Sunday and said it would announce details of upcoming auctions on Monday, signalling a possible change to a system of currency sales brought in to stem a decline in foreign reserves.

In a brief statement, the central bank did not say why it had cancelled Sunday's auction - one of three it had been holding each week for the last few weeks. The new central bank governor, Hesham Ramez, was due to take up his post on Sunday.

 The central bank has been auctioning US dollars to banks on Sundays, Tuesdays and Thursdays as part of the new system brought in to brake the drawdown on its foreign reserves caused by a run on the Egyptian pound amid political uncertainty.

It has held 16 auctions in total since the first auction on 30 December.

The value of the Egyptian pound has weakened steadily since then, losing nearly 8 percent of its value on the interbank market and taking its losses against the dollar to 13.4 percent since the 2011 uprising against Hosni Mubarak.

The pound has weakened further amid off-exchange currency trading that has become more prevalent as the supply of dollars has dried up.

Two separate dealers were prepared to offer several piastres more for dollars than the official buy rate as posted on the boards of their offices on Saturday. One offered 6.76 pounds to the dollar, compared to the official rate of 6.71.

Another offered 6.75 pounds to the dollar.

The Central Bank warned that Egypt's foreign currency reserves had fallen to a critical level when announcing the new auction system. The reserves currently stand at around US$15.5 billion, a 57 percent fall from their level of $36 billion on the eve of the uprising against Mubarak.