Egyptian pound stable at Tuesday auction, weaker on black market

Reuters , Tuesday 3 May 2016

The Central Bank of Egypt (File photo: Reuters)

The Egyptian pound was stable Tuesday at a central bank auction but weakened on the black market.

The central bank sold $119.6 million at EGP 8.78 per dollar, far from the black market rate of around 11.05 per dollar that was quoted on Tuesday. The bank did not give volumes of trade.

Last week, traders on the black market quoted an exchange rate of 10.40/10.50 to the dollar.

The United Arab Emirates recently allocated $4 billion of funding to Egypt, half of it as an investment and half as a central bank deposit to support cash reserves, UAE state news agency WAM reported last month.

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.

In an attempt to close the gap between official and black market rates, the central bank announced in March a more flexible exchange rate policy and devalued the pound to 8.85 per dollar from 7.7301.

It later strengthened the pound to 8.78 per dollar, where it has remained since.

The central bank has sought to crack down on black market trading, meeting with bureaus to push traders to sell closer to the official rate. The central bank has also revoked some trading licenses.

Egypt's public prosecutor is also investigating several currency trading bureaus accused by the central bank of hoarding dollars, judicial sources have said.

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