Egypt pound hits record low on new currency regime
Cairo, December 30, 2012
The Egyptian pound hit a record low on Sunday of about 6.30 to the dollar after the central bank introduced a new currency regime, bankers said.
The previous low for the pound, in October 2004, was about 6.26 to the dollar. The pound opened earlier on Sunday in the interbank bank market with bids of around 6.185 to the dollar.
The central bank said on Saturday it was introducing the new regime to conserve foreign reserves, which it said had fallen to a critically low level.
The central bank sold $74.9 million on Sunday to banks at the maiden foreign currency auction designed to slow the depletion of the country's foreign reserves, with a cut-off price for dollars of 6.2425 Egyptian pounds.
On Saturday, the bank said reserves, which stood at about $15 billion at the end of November, had fallen to a critical level.
Bankers and analysts say the new central bank move may represent a controlled shift towards a free float.
The regime includes regular currency auctions with Egyptian banks allowed to bid for a maximum $11 million each.
This means the price of the Egyptian pound will begin to reflect supply and demand more closely, bankers said.
"The arms of central bank that used to be there will not make market anymore so it is for first time a real free market," said one banker who works in a treasury room. – Reuters