CAIRO: The Egyptian pound hit its all-time official low Monday as it weakened to 7.53 per U.S. dollar at a regular central bank auction, compared to 7.51 at Sunday’s sale.
This is the lowest level the Central Bank of Egypt (CBE) has allowed the local currency to reach since auctions started in December 2012 and it is also the 10th consecutive depreciation, amid expectation of an extended slip in the coming days.
“The bank offered $40 million and sold $38.4 million at a cutoff price of 7.53 EGP per dollar,” the central bank said on its website Monday.
In a step to tighten its grip over dollar trading on the black market, the Central Bank, whose auctions determine the rates at which banks sell the dollar to clients, widened the range in which banks can trade dollars Thursday to 10 piasters above or below the official rate, up from 3 piasters.
This move weakened the dollar to 7.77 EGP on the black market last week. “However, the dollar jumped once again to 7.90 EGP -7.92 EGP at the black market Monday, while it was traded at 7.87 Sunday,” a trader told The Cairo Post.
“The Central Bank’s failure to provide the needed hard currency to local banks pushed clients to buy dollars from the black market regardless the recent slip of the pound on the official market,” the source added.
The Central Bank’s move to let the Egyptian pound depreciate, which started two weeks ago, came shortly after its Monetary Policy Committee decided to cut key interest rates by 50 basis points last week.
Some bankers expect the FX auctions and flexible exchange rates could help the central bank combat the active black market and narrow the gap between the official and unofficial prices ahead of the long-anticipated Economic Summit schedule in March.
Experts say these decisions are aimed at luring fresh foreign direct investments to boost Egypt’s economy which has been stalled by continuing political upheaval since the January 25 Revolution in 2011.