* First day of formal trade without central bank guidance
* Pound weakens marginally
* Many expect much more depreciation
* But little activity initially as dollar supply uncertain
* Black market traders meet to discuss strategy (Adds quotes, close of trade)
By Asma Alsharif and Eric Knecht
CAIRO, Nov 6 (Reuters) - Egypt's pound avoided the sharp drop that many had feared on its first day as a freely traded currency, but bankers said that was because years of dollar shortages had starved the market of liquidity.
The pound weakened in interbank trade on Sunday, slipping from 15.50 per U.S. dollar to close at 16. Volumes were very low with banks reluctant to part with scarce dollar holdings and ordinary people still stashing the greenback under their mattresses to hedge against inflation.
"Banks don't have dollars, and if they do, there is no bank that will sell to another bank," said one banker, adding that most institutions were executing trades at the minimum allowable amount of $10,000.
Egypt floated its currency on Thursday seeking to crush a booming black market for dollars and clinch a $12 billion International Monetary Fund loan. It initially devalued the pound by about a third from its peg of 8.8 to the dollar, then let it slip further.
Banks were open over the Friday-Saturday weekend to accept dollar deposits and sales from clients, but Sunday was the first formal day of trading without direct central bank guidance.
Businessmen and importers welcomed the end of strict rationing of dollar supplies at banks. But some expressed disappointment that the central bank did not flood the system with hard currency to make trading easier.
Many traders think the pound could still depreciate sharply in coming days or weeks as banks struggle to meet an anticipated deluge of pent-up demand from importers.
"All banks are short of dollars ... There need to be inflows coming into the banking system for the interbank market to work," the banker said.
"Logically, if it is a properly functioning market, the natural thing would be for the price of dollars to keep rising, until flows comes in from outside the banking system ... That is not happening now - all banks are just holding on."
FLOWS
Egypt has struggled to attract dollars and revive the economy since the 2011 uprising that ended Hosni Mubarak's 30-year rule drove away tourists and foreign investors, essential sources of hard currency.
The pound hit a record low of 18 per dollar in the black market last Sunday as fears grew that the government would be unable to carry out reforms required to finalise the IMF loan.