Egyptian pound stable in official auction, firmer on black market

Egypt, which depends heavily on imports, is facing a foreign currency crisis

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The Egyptian pound held steady at an official auction on Sunday but strengthened on the black market after the central bank last week supplied the market with foreign currency and eased restrictions on dollar deposits and withdrawals.

The central bank held the pound steady at 7.7301 pounds per dollar, selling $38.8 million, at Sunday’s official auction.

On the black market, the pound strengthened to 9.25-9.30 pounds per dollar from 9.60-9.65 pounds on Thursday, three traders told Reuters, without revealing trade volumes.

Egypt, which depends heavily on imports, is facing a foreign currency crisis and the central bank has been resisting a devaluation, keeping the pound artificially strong through its weekly auctions.

Last week, it lifted caps on withdrawals and deposits of foreign currencies for individuals and companies importing essential goods, while keeping them in place for other corporates.

Last Sunday, the bank held an exceptional auction, offering $500 million to cover imports of strategic goods. The additional liquidity also lowered the dollar rate on the parallel market.

“The price for the dollar has kept falling as demand decreased and the market reacted to Central Bank Governor Tarek Amer’s comments last week on the black market price being unfair,” one trader told Reuters.

To try to keep black market rates in check, the central bank met with foreign exchange bureaus last week to put a cap on prices for the dollar on the black market.

The country has been starved of hard currency since a 2011 uprising ousted autocrat Hosni Mubarak from power and drove away tourists and foreign investors - major sources of hard currency.

A year ago, the central bank imposed controls on hard currency movements, including a cap of $50,000 a month on cash deposits, but it has since eased them as the crisis worsened and imports started piling up at ports.