Egypt's leader sees currency stabilizing "within days"

Mon Dec 31, 2012 8:55am EST
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By Patrick Werr and Yasmine Saleh

CAIRO (Reuters) - Egypt's pound fell to a record low on Monday as the president signaled his government would allow it to depreciate slowly for several more days to stop a drain on foreign reserves that has driven the economy into crisis since the fall of Hosni Mubarak.

Hit by a new bout of political turmoil in the last month, the pound had weakened to a record low on Sunday at a new dollar auction brought in by the central bank. It fell further at a second auction on Monday, last trading at 6.37 to the dollar on the interbank market.

The drop means the central bank has allowed the pound to slide by almost 3 percent over the last two days after limiting its decline to only 6 percent since the uprising that removed Mubarak from power almost two years ago.

The pound's fall, which is certain to increase the price of imported staples such as tea and sugar, underlines the economic crisis facing President Mohamed Mursi as his administration tries to contain the political fall-out of his move to fast-track a contentious new constitution passed into law last week.

Egyptians panicked by street clashes between Mursi's Islamist backers and his more secular-minded opponents on the streets of Cairo and other cities have rushed to change their pounds into dollars in recent weeks, fearing it would be devalued further.

"The market will return to stability," Mursi told Arab journalists on Sunday evening, the state news agency MENA reported.

The pound's fall "does not worry or scare us, and within days matters will balance out," he said.

Having just sold their last dollar bills, dealers at one Cairo foreign exchange bureau did not bother changing their price board when the new low appeared on their trading screens.   Continued...

Egypt's President Mohamed Mursi signs a decree to put into effect the new constitution in Cairo December 25, 2012, in this handout photo released by Egyptian Presidency office. REUTERS/Egyptian Presidency/Handout