Egypt's pound hits new low of 7.34 per dollar Wednesday

Reuters , Wednesday 21 Jan 2015

Egyptian pound (Photo: Reuters)

Egypt's pound weakened to 7.34 per dollar from 7.29 the previous day at a central bank auction on Wednesday, the weakest level it has been allowed to reach since auctions began in December 2012 and the fourth official depreciation this week.

The bank offered 40 million dollars and sold 38.4 million at a cutoff price of 7.34 pounds per dollar, the central bank said.

The rates at which banks are allowed to trade dollars are determined by the results of central bank sales, giving the bank effective control over official exchange rates.

But there remains an active black market in the pound that is used by businesses and individuals and the gap between this and the official rate had been widening for months.

The pound was trading at 7.94 to the dollar on the black market on Wednesday, a dealer said, weaker than Tuesday's unofficial rate of 7.88 to the dollar.

Expectations that the bank would devalue had grown since it announced a surprise 50-basis-point cut in benchmark interest rates on Thursday last week, saying that plummeting global oil prices had eased the inflation outlook.

Traders and analysts expect the central bank to allow the pound to depreciate further to close the gap with the black market rate. Some said it had previously held back due to inflation concerns.

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