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UPDATE 1-Egypt foreign reserves fall by $84 mln in September

Monday, 8 Oct 2012 | 8:08 AM ET

(Adds economist, trader comments)

CAIRO, Oct 8 (Reuters) - Egypt's foreign reserves fell by $84 million in September but held above the $15 billion seen as necessary to shore up the pound for a third straight month after foreign donors began fulfilling promises of aid.

With the reserves still close to danger level, economists cautioned against reading too much into the latest number until it was clear whether it included disbursements of foreign aid. But one said Egypt had adequate reserves till the year-end.

Government efforts to secure a $4.8 billion International Monetary Fund loan to support the struggling economy have cut Egypt's borrowing costs in recent weeks although a planned visit to Cairo by an IMF team has been delayed until late October.

Net international reserves fell to $15.04 billion at the end of September from $15.13 billion at the end of August, the Central Bank of Egypt (CBE) said on its website.

Reserves have plunged by more than half since a popular uprising in January 2011 scared away tourists and investors, two of Egypt's main sources of foreign currency.

Since February, they have hovered near $15 billion, a level seen as a minimum to avoid a crisis of confidence in the local currency the Egyptian pound.

They would have fallen further without aid from countries such as Saudi Arabia and Qatar, disbursed since Egypt's new president took office in late June.

"With the political scene normalising and aid starting to flow, these reserves numbers leave (the central bank) looking pretty well placed to manage the downward pressure on the currency over the rest of the year," said Simon Williams, Dubai-based economist for HSBC.

But he added: "It's hard to read the numbers until its clear if any of the recent aid pledges and disbursements are captured in the data."

Foreign investors began to increase holdings of Egyptian treasury bills in June for the first time since the uprising.

But many are still wary of a sharp fall in the pound that would damage the beleaguered economy and are waiting to see if Egypt will seal the $4.8 billion IMF loan.

"The fall is disappointing. However, reserves are still around the critical three months of import cover and the aid that has materialized in October should increase the coming month's figure," said a Cairo-based fixed income analyst.

Like others, he said he wanted to see a breakdown to determine whether any extra aid was included in the September figure which could mask a bigger drop.

(Reporting By Tamim Elyan and Edmund Blair; Writing by Tom Pfeiffer; Editing by Catherine Evans)

((tamim.elyan@thomsonreuters.com)(+20 2 2578 3290))

Keywords: EGYPT RESERVES/