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Egyptian pound steady at official auction, stronger on parallel market

Reuters , Sunday 15 Nov 2015
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Egypt's central bank kept the pound steady at 7.7301 pounds to the dollar at its official foreign currency auction on Sunday, less than a week after it surprised the market by strengthening the pound.

The central bank sold 37.8 million pounds at a cut off price of 7.7301 pounds to the dollar. Last week it strengthened the pound by 20 piasters from 7.9301 pounds to the dollar.

Egypt, which is heavily dependent on imports for food and energy, is facing a dollar shortage and mounting pressure to devalue the currency. It has been gradually depreciating the pound through official auctions, but the rate is still far from that on the black market.

A trader on the parallel market said the dollar was changing hands at 8.52 pounds to the dollar on Sunday.

The parallel market rate has gradually dropped since the currency was officially strengthened last week, at which time the rate was 8.7 pounds to the dollar.

The decision to strengthen the pound against the dollar last week caused confusion in the market and prompted speculation about a shift in monetary policy.

Egypt's reserves tumbled from $36 billion in 2011 to $16.4 billion in October and the country has been rationing dollars through weekly dollar auctions, keeping the pound artificially strong.

The country has been starved of foreign currency since a popular uprising in 2011 ousted autocrat Hosni Mubarak and drove tourists and foreign investors away. Growing evidence that a Russian airplane crash in the Sinai was caused by a bomb is expected to further threaten tourism revenues.

In February the central bank imposed capital controls, limiting dollar denominated deposits to $50,000 a month in an attempt to fight a black market. The move resulted in hindering imports as importers could no longer source their foreign currency needs.

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