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Egypt’s c. bank keeps pound at 7.7301 per dollar at official FX auction

Egypt's central bank will hold the pound steady at 7.7301 pounds to the dollar at its official foreign currency auction

Published: Updated:

Egypt's central bank will hold the pound steady at 7.7301 pounds to the dollar at its official foreign currency auction on Thursday, traders said, one day after it surprised the market by strengthening the pound.

Egypt, which is heavily dependent on imports for food and energy, is facing a dollar shortage and mounting pressure to devalue the currency. The central bank surprised markets when it strengthened the pound on Wednesday by 20 piasters against the dollar.

The central bank had previously allowed a gradual depreciation of the official rate this year, but it was still far from the black market rate of 8.7 pounds on Wednesday.

The decision to strengthen the pound against the dollar caused confusion in the market and speculation about a shift in monetary policy.

Egypt, whose reserves tumbled from $36 billion in 2011 to $16.4 billion in October has been rationing dollars through weekly dollar auctions and has kept the pound artificially strong through those sales.

The country is currently starved for foreign currency since a popular uprising in 2011 ousted autocrat Hosni Mubarak and drove tourists and foreign investors away. Growing evidence that a Russian airplane crash in the Sinai was caused by a bomb is expected to threaten the country's tourism revenues further.

In February the central bank imposed capital controls, limiting dollar denominated deposits to $50 thousand a month, in an attempt to fight a black market, but the move resulted in hindering imports for the country as importers could no longer source their foreign currency needs.