CAIRO: The Egyptian pound was steady against the dollar at the official foreign currency auction on Thursday but plunged on the black market after the central bank raised a limit on foreign currency deposits at banks.
Egypt, which depends on imported food and energy, is facing a foreign currency crisis and increasing pressure to devalue the pound. But the central bank surprised markets when it strengthened the pound by 20 piasters in November and held it steady ever since.
The central bank sold $39.4 million at a cut-off price of 7.7301 pounds to the dollar on Thursday, unchanged from the previous auction.
The official rate is still far stronger than the black market rate which rapidly fell to around 8.78 pounds to the dollar on Thursday from 8.72 pounds on Wednesday and 8.62 pounds before the central bank's decision on Tuesday.
On Tuesday the central bank raised the cap on foreign currency deposits at banks fivefold to $250,000 to help relieve a dollar shortage that has seen imports of essential goods piling up at ports. The cap, originally implemented a year ago with a $50,000 limit, aimed to fight a black market for dollars.
Egypt has been starved of foreign currency since a popular uprising in 2011 ousted autocrat Hosni Mubarak and drove tourists and foreign investors away.
Egypt's reserves have tumbled from $36 billion in 2011 to $16.4 billion, and the country has been rationing dollars through weekly dollar auctions to banks, keeping the pound artificially strong.
The bank's Monetary Policy Committee raised benchmark rates by 50 basis points last month, citing inflationary pressures.
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.
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