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Egyptian pound stable at extra official auction as Saudi king visits

Reuters , Thursday 7 Apr 2016
A customer counts his U.S. dollar notes in a bank in Cairo, Egypt, March 10, 2016 (Reuters)
A customer counts his U.S. dollar notes in a bank in Cairo, Egypt, March 10, 2016 (Reuters)
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Egypt's central bank said it kept the pound stable at 8.78 pounds to the dollar in an extra foreign currency auction on Thursday, coinciding with a visit by Saudi Arabia's King Salman to sign an oil deal.

The bank, which holds regular forex auctions on Tuesdays, said it sold $118.7 million of an intended $120 million.

Meanwhile the pound weakened on the black market as demand for dollars rose, three traders told Reuters.

Egypt, which relies heavily on imports, has been facing a dollar shortage since a popular uprising in 2011 drove away tourists and foreign investors, major sources of hard currency.

The black market for dollars has sucked up liquidity from the banking system while the central bank kept the pound artificially strong and rationed dollars through its weekly auctions, putting a strain on foreign reserves.

Traders on Thursday quoted a black market price range of 10.30 to 10.32 pounds per dollar, weaker than Wednesday's range of 10.15-10.20, but did not provide volumes of trade.

In an attempt to close the gap between official and black market rates, the central bank devalued the currency to 8.85 per dollar from 7.7301 last month. It then strengthened it to 8.78 per dollar, while adopting a more flexible exchange-rate policy.

In the latest chapter of a crackdown on the black market, central bank governor Tarek Amer reported 15 exchange bureaus to the prosecutor general's office on Saturday, accusing them of hoarding dollars.

Egypt is expecting additional inflows of dollars as a result of Salman's visit. The king is due to sign a $20 billion deal to finance Egypt's petroleum needs for the next five years and a $1.5 billion deal to develop its Sinai region.

Saudi businessmen are also expected to invest around $4 billion in Egypt through projects including the development of the Suez Canal area and energy and agricultural projects.

Egypt's foreign exchange reserves more than halved to $16.56 billion in March from around $36 billion in 2011.

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