* Pound weakened for first time last week since Mursi ouster
* Pound markedly weaker on black market
* Egypt forex reserves under pressure
CAIRO, Dec 23 Egypt's pound fell on
Monday for the third time in a row against the dollar at the
central bank's regular auction of foreign currency, and kept
trading weaker on the black market.
The central bank last week allowed the pound to slip against
the dollar at official prices for the first time since the army
ousted Islamist President Mohamed Mursi in July.
One economist said the authorities appeared to be adjusting
policy to allow the pound to weaken as Egypt prepares to pay off
debts of hundreds of millions of dollars in January, with more
due later next year.
The central bank has burned through billions of dollars
supporting the currency since Egypt's 2011 revolution, which cut
into tourism revenues and foreign investment.
At Monday's dollar auction, the central bank sold $38.6
million to banks at a cutoff price of 6.9075 pounds to the
dollar, weaker than the 6.8972 at the previous sale on Thursday.
On the black market, which has flourished as supplies of
dollars have dried up at official rates, a market participant
said the greenback was offered for 7.45 pounds in comparison to
7.42 pounds on Thursday.
Official exchange rates for the pound are linked to its
price at the foreign exchange auctions brought in by the central
bank a year ago to counter a run on the pound.
In the interbank market, the pound fell to 6.92
against the dollar - three piastres weaker than Sunday's close.
At official rates a year ago, the pound stood at 6.17
against the dollar. It weakened to around 7 in July before
strengthening gradually until last week.
Further pressure on Egypt's reserves is expected as the
country has started paying back part of over $6 billion it owes
to foreign energy companies.
Egypt is due to pay $700 million to the Paris Club countries
in January 2014 and an additional $700 million in July, central
bank governor Hisham Ramez was quoted as saying in a newspaper
interview published this month.
He added it would pay $2.5 billion, the value of bonds owed
to Qatar, towards the end of 2014.
Reserves fell to $17.8 billion at the end of November,
moving closer to the $15 billion mark seen as a critical level
to cover about three months of imports.
Relieving some pressure on reserves, Saudi Arabia, the
United Arab Emirates and Kuwait pledged over $12 billion in aid
to Egypt after the army toppled Mursi following mass protests
against his rule.
"The central bank is having to bend policy a little given
the general market constraints," said Angus Blair, chairman of
business and economic forecasting think-tank Signet.
"It is paying off capital to the oil companies, and it knows
what its commitments are in 2014, and while it knows Egypt can
expect more help from the GCC (Gulf Cooperation Council states),
this is not an infinite amount. I think the market should expect
further weakness in the Egyptian pound."
The central bank was not immediately available to comment.
Currency traders said they were puzzled as to the reasoning
behind the depreciation of the pound.
The central bank has cut interest rates three times by a
total of 150 basis points since July, stressing growth over
inflation and cutting borrowing costs for the heavily indebted
state. Urban consumer prices rose 13 percent in November year on
"For them keeping the currency stable or slightly
appreciating was their only way of fighting inflation," said one
Cairo-based currency trader.
"The premium between unofficial and official rate has been
widening now to about 8 percent. They're trying to close that