Egyptian pound steady at official currency sale and on black market
Egypt’s central bank kept the pound steady at 7.7301 pounds to the dollar at its official foreign currency auction
Egypt’s central bank kept the pound steady at 7.7301 pounds to the dollar at its official foreign currency auction on Sunday three days after it raised benchmark interest rates by 50 basis points. The rate was steady on the black market as well.
Egypt is facing a dollar shortage and mounting pressure to devalue its currency. The central bank has been on a drive to indirectly support the pound and supply banks with dollar liquidity to cover imports despite dwindling foreign reserves.
The bank’s Monetary Policy Committee (MPC) on Thursday raised benchmark rates by 50 basis points, citing inflationary pressures, a week after it shocked markets by postponing its decision.
The central bank sold $39.4 million at a cut-off price of 7.7301 pounds to the dollar, unchanged from Thursday. The official rate is still far stronger than the black market rate, which was around 8.575 pounds to the dollar on Sunday, almost unchanged from Thursday’s 8.57 pounds, traders said.
Egypt, which depends on imports for food and energy, has run short of hard currency since a 2011 uprising drove tourists and investors away. Reserves have almost halved to $16.4 billion.
The most populous Arab state has been facing mounting pressure to devalue its currency and has been rationing dollars to keep the pound strong at 7.7301 pounds to the U.S. currency. It has indirectly raised interest rates and injected dollars into the banking sector to relieve pressure on the currency.
In February, the central bank imposed capital controls, limiting dollar-denominated deposits to $50,000 a month in an attempt to fight the black market. The move caused problems for importers who could no longer source foreign currency to clear goods, which piled up at ports.