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Egyptian pound stable at Tuesday's auction, weaker on black market
May 24, 2016 / 10:41 AM / a year ago

Egyptian pound stable at Tuesday's auction, weaker on black market

May 24 (Reuters) - Egypt’s central bank kept the pound steady against the dollar at its official foreign currency auction on Tuesday, central bank data showed, and the currency weakened slightly on the black market.

The central bank sold $118.6 million at a cut-off price of 8.78 dollar, unchanged from last week.

The central bank has kept the pound artificially strong since it devalued the currency in March to 8.78 per dollar from 7.7301 and announced a more flexible exchange rate policy.

Dollars are rationed through weekly auctions and imports of essential goods get priority.

A shortage of dollars in the formal banking system since a 2011 uprising that drove away tourists and foreign investors, key sources of hard currency, has made it difficult for import businesses. Many of them now rely on a black market where they can procure currency for a higher price.

The rate on the black market has grown weaker since the March devaluation, at which time it was roughly in line with the official rate.

One currency trader cited 11 pounds per dollar as the black market rate on Tuesday, modestly weaker than the 10.95/.96 pounds cited earlier in the week.

The rate jump comes less than one week after an EgyptAir plane crash in the Mediterranean that has threatened to further damage the country’s ailing tourism industry, a key source of hard currency. That was the third blow since October to hit Egypt’s travel industry.

Foreign reserves have more than halved since 2011 to stand at $17.01 billion at the end of April.

Reporting by Ola Noureldin; Editing by Tom Heneghan

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