UPDATE 9-Military halts clashes as political crisis grips Egypt
* Republican Guard deploys tanks, tells crowds to leave
* Islamists comply, some Mursi opponents stay
* Mursi to address nation after clashes kill 7
* Egypt pound hits 8-year low, stocks, forex reserves down
By Marwa Awad and Edmund Blair
CAIRO, Dec 6 (Reuters) - Egypt's Republican Guard restored order around the presidential palace on Thursday after fierce overnight clashes killed seven people, but passions ran high in a struggle over the country's future.
The Islamist president, Mohamed Mursi, criticised by his opponents for his silence in the last few days, was due to address the nation later in the day, state television said.
Hundreds of his supporters who had camped out near the palace overnight withdrew before a mid-afternoon deadline set by the Republican Guard. Dozens of Mursi's foes remained, but were kept away by a barbed wire barricade guarded by tanks.
The military played a big role in removing President Hosni Mubarak during last year's popular revolt, taking over to manage a transitional period, but had stayed out of the latest crisis.
Mursi's Islamist partisans fought opposition protesters well into the early hours during duelling demonstrations over the president's decree on Nov. 22 to expand his powers to help him push through a mostly Islamist-drafted constitution.
Officials said seven people had been killed and 350 wounded in the violence, for which each side blamed the other. Six of the dead were Mursi supporters, the Muslim Brotherhood said.
The street clashes reflected a deep political divide in the most populous Arab nation, where contrasting visions of Islamists and their liberal rivals have complicated a struggle to embed democracy after Mubarak's 30-year autocracy.
The United States, worried about the stability of an Arab partner which has a peace deal with Israel and which receives $1.3 billion a year in U.S. military aid, has urged dialogue.
The commander of the Republican Guard said deployment of tanks and troop carriers around the presidential palace was intended to separate the adversaries, not to repress them.
"The armed forces, and at the forefront of them the Republican Guard, will not be used as a tool to oppress the demonstrators," General Mohamed Zaki told the state news agency.
Hussein Abdel Ghani, spokesman of the opposition National Salvation Front, said more protests were planned, but not necessarily at the palace in Cairo's Heliopolis district.
"Our youth are leading us today and we decided to agree to whatever they want to do," he told Reuters.
Egypt plunged into renewed turmoil after Mursi issued his Nov. 22 decree and an Islamist-dominated assembly hastily approved a new constitution to go to a referendum on Dec. 15.
The Supreme Guide of the Brotherhood, to which Mursi belonged before he was narrowly elected president in June, appealed for unity. Divisions among Egyptians "only serve the nation's enemies", Mohamed Badie said in a statement.
Rival factions used rocks, petrol bombs and guns in the clashes around the presidential palace.
"We came here to support President Mursi and his decisions. He is the elected president of Egypt," said demonstrator Emad Abou Salem, 40. "He has legitimacy and nobody else does."
Opposition protester Ehab Nasser el-Din, 21, his head bandaged after being hit by a rock the day before, decried the Muslim Brotherhood's "grip on the country", which he said would only tighten if the new constitution is passed.
Another protester, Ahmed Abdel-Hakim, 23, accused the Brotherhood of "igniting the country in the name of religion".
Mursi's opponents accuse him of seeking to create a new "dictatorship". The president says his actions were necessary to prevent courts still full of judges appointed by Mubarak from derailing a constitution vital for Egypt's political transition.
Mursi has shown no sign of buckling under pressure from protesters, confident that the Islamists, who have dominated both elections since Mubarak was overthrown, can win the referendum and the parliamentary election to follow.
Mahmoud Hussein, the Brotherhood's secretary-general, said holding the plebiscite was the only way out of the crisis, dismissing the opposition as "remnants of the (Mubarak) regime, thugs and people working for foreign agendas".
As well as relying on his Brotherhood power base, Mursi may also tap into a popular yearning for stability and economic revival after almost two years of political turmoil.
The Egyptian pound sank on Thursday to its lowest level in eight years, after previously firming on hopes that a $4.8 billion IMF loan would stabilise the economy. The Egyptian stock market fell 4.4 percent after it opened.
Foreign exchange reserves fell by nearly $450 million to $15 billion in November, indicating that the Central Bank was still spending heavily to bolster the pound. The reserves stood at about $36 billion before the anti-Mubarak uprising.
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