Egypt Pound Down in Banks Despite Forex Sale, Traders Urge Exceptional Bid
For the first time since June 30 Uprising, the Egyptian pound weakened despite a foreign exchange auction on Thursday, the Central Bank of Egypt (CBE) said, ending a period of gradual strengthening in the official market while it continues to trade weaker on the black market.
The US dollar hit EGP 6.9071 for buying and EGP 6.9372 for selling on Thursday.
The pound weakened on Wednesday for the first time at a central bank foreign currency auction since July 3, when the army deposed Islamist President Mohamed Morsi following mass protests against his rule, according to Reuters.
The central bank sold $37.2 million to banks at Thursday’s auction, with a cutoff price of 6.8972 pounds to the dollar, weaker than the 6.8869 at the previous sale on Wednesday. It had offered up to $40 million.
Two market participants said the dollar was offered for 7.42 pounds in the black market on Thursday.
The average midpoint of three black market rates on Wednesday cited by market participants was 7.40 pounds to the dollar.
The central bank introduced dollar currency sales a year ago to help counter a run on the pound. It has burned through at least $20 billion – or roughly half its reserves – supporting the currency since Egypt’s 2011 revolution, which cut into tourism revenues and foreign investment.
The central bank has limited Egyptians from transferring more than a cumulative $100,000 out of the country since the 2011 uprising unless they can demonstrate a pressing need for the funds. Many wealthier Egyptians have reached their limit and are no longer able to send funds abroad.
In January, this limit will be raised by another $100,000, Central Bank governor Hisham Ramez said this month.
Depositors at banks can only withdraw a maximum of $10,000 in foreign currency per day under central bank rules, but in practice many banks restrict such withdrawals to much less and demand documents to show why the client needs the funds.
Moreover, the foreign exchange shops in Egypt have referred to the USD liquidity deficit, saying the market is currently in a dire need for an exceptional FX Auction by the CBE to control the exchange prices and meet with the importers’ demands.
*This story has been edited by Amwal Al Ghad English
