Egypt’s Pound hits Weakest Official Level since December 2012

The central bank let the Egyptian pound depreciate on the official market for the first time since July, allowing it to reach 7.19 pounds per dollar, its weakest level since auctions began in December 2012.

The bank offered 40 million dollars and sold 38.5 million at a cutoff price of 7.19 pounds per dollar, weaker than previous sales’ rate of 7.14 pounds, the central bank said.

The move comes days after the bank surprised with a cut to its benchmark interest rates of 50 basis points.

The central bank did not give a reason for the move and could not be immediately reached for comment.

“We can safely describe this as a surprise,” said a banker at an Egyptian lender.

The rates at which banks are allowed to trade dollars are determined by the results of central bank sales, giving the central bank effective control over official exchange rates, though there remains an active black market in the pound.

The pound was changing hands at 7.84 to the dollar in the unofficial market, one trader said, weaker than levels around 7.75 quoted on Thursday.

“The depreciation could be a step by the central bank to move the rate towards the black market price,” the Egyptian banker said.

The bank introduced a fourth weekly dollar auction in December as part of efforts to curb the flourishing currency black market after the gap between the official and unofficial rates widened.

The move has so far failed to narrow the gap substantially.

Source: Reuters