Egypt pound weakens in central bank sale, parallel market

The Egyptian central bank sold $37.5 million at a cut-off price of 7.9301 per dollar at its dollar sale on Sunday, 0.10 pounds weaker than Thursday’s dollar sale.

The pound weakened further on the parallel market with the dollar changing hands at 8.40 pounds, one trader said, while another put it at 8.42 pounds to the dollar, weaker than Thursday’s rate of 8.25 pounds.

Egypt, which has been facing a currency crisis due to what many economists consider to be an over valued pound, had allowed the pound to weaken to 7.8301 pounds per dollar from 7.7301 on Thursday.

Allowing the currency to weaken in a controlled way could boost Egypt’s exports and attract further investment, but it also increases an already large bill for imports of fuel and food staples.

The central bank had kept the pound steady at 7.5301 to the dollar for five months until July, when it allowed it to slide to 7.6301. On July 5, the bank let it slip by a further 0.10 pound.

Egypt has sought to tame a once-thriving currency black market by imposing a cap on dollar-denominated bank deposits among other measures.

In January the central bank allowed banks to exchange currency at up to 0.10 pound above or below the official rate, with currency exchange bureau allowed to trade at 0.15 pound above or below the official rate.

Foreign currency reserves, which stood at about $36 billion before the 2011 uprising, were $16.335 billion at the end of September despite billions of dollars in Gulf Arab aid since mid-2013.