The Egyptian pound was strengthened against the US dollar at an exceptional auction held by the Central Bank of Egypt on Wednesday, a senior CBE official said.
The CBE offered to sell $1.5 billion to banks at a price of EGP 8.78 per dollar, effectively increasing the value of the pound by 0.07, state news agency MENA reported, citing bankers.
The increase in the value of the country’s local currency came two days after the CBE’s decision to adopt a more flexible exchange rate, depreciating the pound by 14 percent against the dollar from the previous rate of 7.73.
According to the official, the Wednesday auction represents the third tranche to cover the dollar debt of the private sector. “The previous tranches were through two auctions that were held months ago worth a total of $1.6 billion ” the official told Ahram Online in a text message.
"Strengthening the pound was a form of subsidy to support importers, which has been done before," said Hany Farahat, senior economist at Cairo-based CI Capital, who expects similar auctions to take place, including one to multinational corporations next week.
The auction is the third of its kind this week, with the intent to clear import-related debt in the midst of a hard currency crunch.
The CBE has sold $396.4 million to the banks at special auctions over the past two days at a cut-off price of EGP 8.85 per dollar to help financing the imports of essential commodities.
The consecutive auctions are designed to "eradicate" Egypt's currency black market, CBE governor Tarek Amer told Al-Ahram Arabic news website on Tuesday, referring to a parallel market that has flourished as the CBE defended the pound following the 2011 revolution, which caused political and economic turmoil.
"We are expecting minimal up and down movements [in the exchange rate], which could help destabilise the parallel market price and bring it closer to the official rate," Farahat said.
*Additional reporting by Waad Ahmed