Egypt’s pound depreciates again
The Egyptian pound weakened to a new record low against the US dollar on Thursday, extending its losses to 6.4 percent since the central bank introduced a new system of foreign currency auctions to curb a decline in foreign reserves. This came hours after Qatar announced that it is willing to pump in more money to help Egypt avoid bankruptcy as it economic state continues to worsen.
Following Thursday’s auction of dollars, the pound weakened to 6.60 against the dollar on the interbank market, compared to 6.58 on Wednesday. In recent weeks, the Egyptian currency is going through its worst experience as it continues on its unprecedented decline after a short-lived stability when the auctions where introduced by the central bank.
The auctions introduced on December 30 are part of a shift in currency policy designed to curb the fall in foreign reserves, which the central bank has warned are at a critical low and decided that there was a need to ration its reserves.
The latest auction held by the central bank, its 11th since its inception, accepted bids worth more than $72 million with a cut-off price of 6.57 pounds to the dollar although it was offering $75 million. Prior to the latest auction, it offered a cut-off price of 6.55 pounds to the dollar. On the interbank market, the central bank limits trades to a 0.5 percent band above or below the weighted average of bids at the most recent currency auction, limiting how far it can move.
However, speculators have also contributed to its weakening and further deep losses risk a surge in inflation that would hit ordinary Egyptians hard.
The government is hoping that the IMF loan coupled with the Qatari funds will ease the situation.