Egyptian pound stable at Tuesday's auction, weaker on black market

Reuters , Tuesday 24 May 2016

Central Bank of Egypt's headquarters is seen in downtown Cairo, Egypt March 8, 2016 (Reuters)

Egypt's central bank kept the pound steady against the dollar at its official foreign currency auction on Tuesday, central bank data showed, and the currency weakened slightly on the black market.

The central bank sold $118.6 million at a cut-off price of EGP 8.78, unchanged from last week.

The central bank has kept the pound artificially strong since it devalued the currency in March to EGP 8.78 per dollar from EGP 7.7301 and announced a more flexible exchange rate policy.

Dollars are rationed through weekly auctions and imports of essential goods get priority.

A shortage of dollars in the formal banking system since a 2011 uprising that drove away tourists and foreign investors, key sources of hard currency, has made it difficult for import businesses. Many of them now rely on a black market where they can procure currency for a higher price.

The rate on the black market has grown weaker since the March devaluation, at which time it was roughly in line with the official rate.

One currency trader cited EGP 11 per dollar as the black market rate on Tuesday, modestly weaker than the EGP 10.95/.96 cited earlier in the week.

The rate jump comes less than one week after an EgyptAir plane crash in the Mediterranean that has threatened to further damage the country's ailing tourism industry, a key source of hard currency.

Foreign reserves have more than halved since 2011 to stand at $17.01 billion at the end of April.

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