Egypt's central bank kept the pound steady at 7.53 pounds to the dollar at a foreign exchange auction on Monday, while the currency strengthened on the black market. The central bank said it offered $40 million on Monday and sold $38.4 million at a cut-off price of 7.5301 pounds per dollar, the same as at the previous sale on Thursday.
The central bank has now kept the official exchange rate steady for one month after letting the pound weaken in an effort to wipe out black market trading. The pound strengthened on the parallel market, with one trader quoting a rate of 7.65 pounds compared to Thursday's rate of 7.68 pounds. Analysts say the central bank may have decided to stabilise the currency to stop it from depreciating too much and because it hopes other recent measures will have an impact.
The central bank cancelled a regular dollar auction a day earlier and instead sold $420 million in the interbank market. Economists said the move was intended to ensure liquidity in the economy as it moves to eradicate a currency black market and boost investor confidence. Investment Minister Ashraf Salman told a business conference on Monday that Egypt had started to devalue its currency in order to address the shortage of hard currency, which is still making it difficult for foreign portfolio and industrial investors to repatriate profits.
The rates at which banks are allowed to trade dollars are determined by the results of central bank sales, giving the bank effective control over official exchange rates. As well as letting the pound depreciate, the central bank gave banks permission late last month to widen the band around the official rate at which they can trade dollars and imposed a limit on dollar deposits in banks.
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