Egypt's currency falls to a new low

"This is a kind of controlled devaluation," said one of the bankers from a state bank who had attended meetings with the central bank governor to discuss the plan.

"And this is only in the first four hours," he added, speaking on condition of anonymity because he was not authorized to speak to the media.

According to the new plan, retail buyers will pay up to 2 percent commission on purchasing dollars from the bank. It also limits banks from holding more than 1 percent of their capital net worth in foreign currency, down from 10 percent.

"This will create new supply," Abdel-Hamid said.

Both bankers said it remains to be seen how the new auction system will help stabilize Egypt's currency as the market remains worried about the government's ability to draw up and implement reforms in a highly polarized political environment.

Prime Minister Hesham Kandil tried to address those concerns, calling for national unity in the face of tough economic reforms needed to secure the IMF loan and buoy investor confidence.

"We need the vote of confidence from the IMF," he told reporters. "We hope to have more consensus on the government program. We hope there are no core changes to our plan with the fund," he added. He did not say when talks with the IMF would resume.

At another venue, Finance Minister Mumtaz el-Said told reporters that the governor of the central bank was meeting with heads of banks to discuss the outcome of the auction.

"The alternative to devaluing the pound may be to print money," el-Said said. "We refuse this ... Since 2003 till now, we never printed money." Devaluing the pound, he added, could add to the government burden and the budget but will also boost the government's foreign currency earners, such as Suez Canal revenues.