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Egypt’s central bank set new exchange-rate movement limits for the interbank market as Governor Hisham Ramez, who took office yesterday, seeks to curb the worst currency slump since the 2003 devaluation.
Starting today, the pound can move by a maximum of 1 piaster against the U.S. dollar from the weighted average exchange rate at the most-recent dollar auction, instead of the previous 0.5 percent band, according to central bank regulations e-mailed to lenders and seen by Bloomberg News. There are 100 piasters to the pound.
The currency has weakened 7.6 percent to a record since the central bank started selling dollars at auctions on Dec. 30, limiting the amount each bank can buy to stem the worst decline in foreign-currency reserves since 2004. The regulator sold $73.1 million at today’s auction at a weighted average bid price of 6.6920 a dollar. The pound strengthened 0.2 percent to 6.7020 at 1:14 p.m. in Cairo, according to data compiled by Bloomberg.
“The move is part of the central bank’s efforts to limit depreciation,” Anthony Simond, who helps manage $11 billion in emerging-market debt at Aberdeen Asset Management Plc (ADN) in London, said by phone. “But no matter what the central bank does, the depreciation trend will be hard to stop.”
No one at the central bank was available for comment when contacted by Bloomberg News.
Reserves have plunged almost 60 percent since the 2011 uprising that ousted President Hosni Mubarak as foreign investors sold government securities anticipating a currency devaluation. “Policy uncertainty surrounding the currency means there’s too much risk for foreign investors to be involved right now,” Simond said.
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