Egyptian pound strengthens on black market after exceptional auction

08 Mar, 2016

CAIRO: The Egyptian pound strengthened significantly on the black market on Tuesday, two days after the central bank injected $500 million into the banking system in an exceptional auction.

Egypt, which depends heavily on imports, is facing a foreign currency crisis and is under increasing pressure to devalue the pound, which the central bank has kept steady at 7.73 pounds to the dollar since November.

The currency has been depreciating rapidly on the black market in recent weeks and was hovering around 9.87 to the dollar just before Sunday's exceptional auction - in which the central bank sold $500 million to cover imports of strategic goods - one currency trader said on Tuesday.

On Tuesday however the pound strengthened on the black market, with two traders quoting rates of 9.60/9.70 to the dollar.

One trader cited Sunday's major dollar injection as the reason behind the stronger rate.

At its regular auction on Tuesday the central bank sold $38.8 million at a cut-off price of 7.7301 pounds to the dollar on Tuesday, unchanged from the previous auction.

Egypt has been starved of foreign currency since an uprising in 2011 ousted autocrat Hosni Mubarak but drove away tourists and foreign investors - major sources of hard currency.

A year ago, the central bank imposed strict controls on hard currency movements.

These were eased this year but the currency shortage has made it harder for companies to operate and forced many to resort to the black market for their dollar needs.

Trading for dollars in the black market is now limited to regular customers, traders said, with many exchanges fearing a crackdown after several were closed down in February.

Copyright Reuters, 2016

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