Egypt’s Central Bank Holds FX Currency Auction to Raise Funds for Paying Imports

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Egypt’s Central Bank Holds FX Currency Auction to Raise Funds for Paying ImportsEgyptian central bank plans to offer $1.1 billion in a FX currency auction today in order to ensure bank obtain dollars needed for paying food imports.

The North African country has been grappling with a shortage of dollars after tourists and investors fled the country following the unrests that toppled former leader Hosni Mubarak.

Egypt’s FX reserves in April grew to $17.489 billion, up from $17.414 billion a month earlier, though they still lag the $36 billion worth of reserves accumulated just before the 2011 riots.

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

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Today’s auction is likely to net larger amounts of foreign exchange than the $40 million FX auction that the country conducts thrice a week. The country’s weak finances have affected the payment of food imports. Traders and banks have expressed concerns that some financing issues that cropped early in 2013 have resurfaced again.

Egypt, the world’s largest wheat importer, regularly buys subsidized food in order to curb any possibility of a social unrest. The country sold $1.5 billion worth of FX in the previous exceptional dollar auction that was held on January 27, with the cut-off price standing at 6.9518 Egyptian pounds.

The local currency has steadily weakened over the past 10 auctions due to central bank’s intervention. It was sold at 7.0451 in the last auction held on Monday. Egyptian pound was also retailing at 7.49/52 pounds to the dollar in the black market, up from yesterday’s 7.52/54. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com