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Egypt's pound steady at official auction after earlier depreciation

Reuters , Tuesday 7 Jul 2015
Egyptian pounds
Egyptian pounds (Photo: AP)
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Egypt's central bank held the Egyptian pound steady at 7.73 pounds to the dollar at a foreign exchange auction on Tuesday following a depreciation over the past week, while the currency weakened on the parallel market.

The central bank said it had offered $40 million and sold $39.6 million at a cut-off price of 7.7301 pounds per dollar , unchanged from Sunday's rate.

The central bank had held the pound at 7.5301 pounds for the past five months until last Thursday, when it allowed it to weaken to 7.6301. On Sunday, the bank shaved a further 0.10 pounds off the rate.

Analysts say allowing the pound to weaken in a controlled manner could boost exports and attract further investment.

However a weaker currency could raise Egypt's large bill for imports, which many Egyptians rely on for fuel and food staples.

As well as allowing the pound to depreciate, Egypt has taken steps to eliminate a once-thriving currency black market, including a cap on dollar-denominated bank deposits.

One currency trader said the pound was changing hands at 7.94 to the dollar and another said the rate had reached 8.0 pounds, both weaker than the 7.87 pounds quoted after Sunday's auction and outside the band set by the central bank.

The central bank gave banks permission in January to trade dollars up to 0.10 pounds more or less than the official rate, with an extra 0.05 pounds for currency exchange bureaus.

Egypt's central bank governor on Sunday sought to soothe local market nerves about the pound's depreciation, calling the movement "natural".

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