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Egypt's Central Bank revises FX auction process, denies dollars to some lenders

Some banks had been denied dollars in Tuesday forex auction, which was based on a revised internal allocation process, said central bank

Reuters , Tuesday 1 Dec 2015
Central Bank of Egypt
People and vehicles are seen caught in a traffic jam in front of the Central Bank of Egypt's headquarters in downtown Cairo in this March 17, 2013 (Reuters)
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Egypt's central bank said it held the pound steady at 7.7301 to the dollar on Tuesday after a regular foreign exchange auction that caused confusion in the markets because some bankers said they had been denied dollars.

For its part, CBE said on Tuesday that it had revised the way it allocated foreign currency at its regular auction without giving further details.

Banks are accustomed to receiving a regular quota of foreign exchange at each auction. The central bank gave no explanation on its website as to the refusals.

The central bank said it sold $39.4 million at its official announcement of the auction results, adding that the pro-rata was 57.14 percent.

Bankers said that means that fewer banks received dollars but at higher allocations. The pro-rata was around 20 percent in previous auctions, meaning banks received around 20 percent of the amount they requested at auctions.

The central bank uses regular auctions to help set the official exchange rate and announced a foreign exchange auction would be held on Dec. 1, calling for bids to be submitted from 11 am to 11.30 am (0900 -0930 GMT).

The auction for $40 million is the second since Central Bank Governor Tarek Amer started his post on Nov. 27.

Before the auction results were announced, three bankers said that they submitted bids but were told by the central bank that it had "nothing to offer," while a fourth said he was told his bid had been "noted". It was not clear how many banks received dollars.

Egypt, which is heavily dependent on imports, is facing a dollar shortage and mounting pressure to devalue the pound. Egypt's reserves have tumbled to $16.4 billion in October from $36 billion in 2011, and the country has been rationing dollars through weekly auctions, keeping the pound artificially strong.

The central bank had been gradually depreciating the pound through the official auctions, but the rate is still far from that on the black market.

The central bank surprised markets when it strengthened the pound on Nov. 11 by 20 piasters against the dollar, prompting speculation about a shift in monetary policy. 

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