CAIRO, Feb 11 (Reuters) - Egypt’s central bank sold fewer dollars to banks on Monday than it has since introducing forex auctions in December to avert a currency crisis, as the United States urged Cairo to complete an economic aid deal with the IMF.
The central bank sold $37.8 million for Egyptian pounds at the auction, less than the $40 million it had offered.
The cut-off price at Monday’s sale was 6.7082 Egyptian pounds to the dollar, fractionally weaker than the price of 6.7043 at the last dollar auction held on Thursday.
A shortage of dollars meant the volume of hard currency changing hands in interbank trade was low, said one foreign exchange dealer, noting that the pound continued to trade on the black market at levels weaker than official rates.
Official rates have fallen to historic lows, with the pound having lost 8 percent of its value against the dollar since the central bank introduced the auctions in late December.
The amount the pound can move in official trade is now limited by a 0.01 piastre trading band imposed by the central bank last week after new governor Hisham Ramez took office.
“Interbank volumes are very low because all banks are short of dollars,” said a trader, speaking on condition of anonymity.
In official trade, the pound was bid at around 6.72 to the dollar following Monday’s auction. The prices bid by banks at the auction determine the official exchange rate.
“In the black market we are hearing 6.95,” the dealer said. “The demand is high. There are some orders accumulating from around a month (ago). We are trying to fulfil demand but it is difficult.”
The auction was the 20th since the central bank initiated the dollar sales in a bid to bolster what it warned were critically low foreign reserves following a flight into dollars by Egyptians worried about their country’s political turmoil.
Reserves dipped further in January to $13.6 billion - below the $15 billion needed to cover three months’ worth of imports.
Meanwhile, in unusually blunt comments, Anne Patterson, the U.S. ambassador to Egypt, said Egypt’s government and opposition must stop ignoring economic problems and work together to fix them, including securing a $4.8 billion IMF loan that has been under negotiation for months.
“The talks with the International Monetary Fund need to be brought to closure,” she said in a speech delivered on Sunday, a copy of which was published on the U.S. embassy’s website.
Patterson highlighted Egypt’s dwindling foreign reserves and a growing reliance on imported food and energy as warning signs, noting that these were key determinants of social stability.
The reserves are kept afloat only due to regular injections of cash by Qatar and Turkey, she said, noting that a black market for dollars was growing and the exchange rate “needs to respect fundamental laws of economics”.