Egypt banks seek dollars on first day of flotation, black market makes shy comeback

Ahram Online , Sunday 6 Nov 2016

currency exchange office
An Egyptian vendor sells nuts in front of a giant poster of a U.S. dollar outside a currency exchange office in Cairo, Egypt (AP)

As Egyptian banks started on Sunday to freely set the rates of foreign currencies since the central bank floated the Egyptian pound at the end of last week, the black market has unexpectedly resumed its activities after a three-day hiatus to challenge the US dollar’s rate set by local lenders.

The official exchange rate of the greenback has already reached an average of EGP 16, according to four banks surveyed by Ahram Online. The local lenders are only selling dollars to those who are travelling abroad.

“So far, the dollars collected by banks have been poor since the [pound was floated],” a banker who asked to be anonymous told Ahram Online. “For example, my branch only collected $1,200.”

Egypt's two biggest public banks announced on Thursday the introduction of two new high-yield EGP saving certificates following the central bank’s decision to liberalise the exchange rate of the local currency in an attempt to attract customer cash liquidity.

The National Bank of Egypt and Banque Misr offer a three-year maturity certificate at a yearly yield of 16 percent, as well as an 18-month maturity certificate at a yearly interest rate of 20 percent.

However, in the black market, the dollar was bought at EGP 16.50 “to keep attracting the holders of the US currency away from the banks,” a trader in Cairo told Ahram Online on condition of anonymity.

“Workers and housewives were mostly selling their dollars today, and even if the rate is only EGP 0.10 higher than the formal sector, people will leave the banks for us,” the trader said.

Another trader in the coastal governorate of Suez told Ahram Online that the dollar’s rate registered EGP 17.

The Central Bank of Egypt decided on Thursday to freely float the pound and raise key interest rates as part of a set of reforms aimed at alleviating the dollar shortage, eradicating the black market and stabilising the country's flagging economy.

While there are no longer any set limits on foreign currency deposits or withdrawal for both individuals and firms, a previous cap of $50,000 in cash deposits per month and $30,000 in withdrawals per day for importers of non-essential goods remains in place. 

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