"It weakened in the last two days of last week, mainly on the back of some large corporate demand to pay dividends, in addition to outflow from maturing T-bills for foreign investors," the Cairo-based head of a bank treasuries desk said.

Other dealers said the pound was hurt by reports the government was cancelling a previously arranged $3 billion financing deal from the IMF and $1 billion in budget support proposed by the World Bank.

The pound was at 5.9590 to the dollar after touching 5.9620, it’s weakest since April 14.

"Foreigners definitely see it as a bad move for the government to turn down this aid," said a Cairo forex trader. "We started to see those selling pounds last week after the government revised its budget, and now some locals are selling too."

Some dealers said speculators could enter the market if the pound's weakness continued.

"But I don't think the weakness will last long as we are approaching levels where the central bank has intervened before," said the forex trader.

The central bank has drawn down official and unofficial reserves by more than $15 billion since the popular uprising hat unseated President Hosni Mubarak erupted in January. Analysts say the bank has been drawing down reserves to support the pound.

Copyright Reuters, 2011