Reuters – The Egyptian pound weakened at a foreign exchange auction on Monday, sliding for the third time in a row at the central bank’s regular dollar sale as it continued to trade weaker on the black market.
The central bank sold $38.6 million to banks at Monday’s auction, with a cutoff price of 6.9075 pounds to the dollar, weaker than the 6.8972 at the previous sale on Thursday. It had offered up to $40 million.
“The central bank is having to bend policy a little given the general market constraints,” said Angus Blair, chairman of business and economic forecasting think-tank Signet.
“It is paying off capital to the oil companies, and it knows what its commitments are in 2014, and while it knows Egypt can expect more help from the GCC (Gulf Cooperation Council states), this is not an infinite amount. I think the market should expect further weakness in the Egyptian pound.”
Last week, the pound weakened against the dollar for the first time since July, when the army removed Islamist President Mohamed Morsi after mass protests against his rule.
On the black market, a market participant said the dollar was offered for 7.45 pounds in comparison to 7.42 pounds in the black market on Thursday.
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. 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.