More on Egypt's potential currency crisis

Reuters:  Egypt pound hits record low under new currency regime

"Prior to Sunday's launch of the new currency regime, the central bank had let the pound weaken by only 6 percent against the dollar since the uprising against Hosni Mubarak in early 2011 chased away tourists and foreign investors, two of the main sources of demand for Egypt's currency....At the maiden auction of the new regime on Sunday, the central bank sold virtually all of the 75 million USD it had offered, with the highest price of pounds at 6.2425 to the dollar, down from 6.185 earlier in the day...The pound subsequently weakened on the interbank market to about 6.30, a fall of 1.8 percent from the morning, smashing through a previous low in October 2004...The auction system means the price of the Egyptian pound will begin to reflect supply and demand more closely, bankers said. The central bank is expected to hold the auctions daily..."The arms of central bank that used to be there will not make (the) market anymore, so it is for first time a real free market," said one banker who works in a treasury room.  In a note, Pharos Research forecast a forecast a free float with the pound weakening to 6.50 to the U.S. dollar from about 6.185 now."

Assume Pharos is correct and the central bank can manage a devaluation to 6.50 EGP to the USD - that would not be a disaster in the realm of currency devaluations.  The real question is can the bank stop speculators from running against the pound.  When you 'smash' through your all times lows there is a tendency for speculators to pile on.  The central bank is putting policies in place to try to stem speculation

"As part of the currency adjustment the central bank also imposed a series of measures to dampen demand for foreign currencies, at least in the short term. They included limiting corporate clients from withdrawing more than 30,000 USD in cash per day and charging individuals who buy foreign currencies a 1-2 percent administrative fee, bankers said...Egyptian banks will also not be able to hold long positions in U.S. dollars of more than 1 percent of their capital, down from a previous 10 percent, the bankers added...Under the new regime, withdrawals by individuals will continue to be limited to 10,000 USD a day. All transactions will continue to be monitored to make sure they are for "legitimate" needs and do not involve speculation, bankers said."

Still it would be good if the "exchanger of last resort" were to appear - with a big hammer.