May 14, 2014 / 9:31 AM / 4 years ago

CORRECTED-UPDATE 1-Egypt to hold exceptional forex sale to clear 'food backlogs'

(Corrects Tuesday’s black market rate in paragraph 7 to 7.52/54, not 7.49/52)

CAIRO, May 14 (Reuters) - Egypt’s central bank will hold an exceptional foreign currency auction for $1.1 billion on Wednesday to raise funds to cover its food import needs, it said in an emailed statement.

Egypt has been suffering from a sustained dollar shortage as political turmoil following the 2011 uprising against veteran leader Hosni Mubarak unnerved foreign investors and tourists, traditionally major sources of foreign currency.

“This auction is intended to cover and clear all pending food backlogs to secure availability of staple food commodities over the coming period,” the bank said in the statement.

Wednesday’s auction is significantly larger than the $40 million foreign currency sale Egypt holds three times a week.

At its last exceptional dollar auction on Jan 27 the central bank sold $1.5 billion at a cut-off price of 6.9518 Egyptian pounds.

The Egyptian pound has been dropping for the last 10 sales as the central bank allows it to weaken. It has been hitting successive lows. At its last auction on Monday the cut-off price was 7.0451 pounds.

On the black market, the dollar traded at around 7.49/52 on Wednesday, slightly stronger than Tuesday’s rate of 7.52/54, a trader said.

The bank introduced regular dollar sales in December 2012 to counter a run on the pound.

The rates banks are allowed to trade dollars at are determined by the results of the central bank sales, giving the bank effective control over official exchange rates.

Reporting By Shadia Nasralla; Editing by Gareth Jones

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