Egypt central bank sells $120 mln at regular FX auction

Reuters , Tuesday 5 Apr 2016

Egypt's central bank kept the pound steady at 8.78 per dollar at its regular auction on Tuesday, selling $120 million to cover multinational companies' needs to clear payment backlogs for the import of staples and pharmaceutical goods.

The pound weakened on the black market as demand for dollars rose amid speculation of a devaluation of the pound at the regular auction, three black market traders told Reuters.

Egypt, which relies heavily on imports, has been facing a dollar shortage since a popular uprising in 2011 that were followed by political and security upheaval drove away tourists and foreign investors, both major sources of hard currency.

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

Three black market traders said the pound had weakened on Tuesday to 10.10 pounds per dollar compared to around 10.05 pounds per dollar a day earlier. They did not give volumes of trade.

"There is increased demand and there was also speculation ahead of the auction that the central bank would devalue the pound and that increased demand for dollars too," one trader said.

The central bank devalued the pound to 8.85 per dollar from 7.73 on March 14 and announced it would pursue a more flexible exchange rate. It later strengthened the pound to 8.78 per dollar.

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