Egypt’s central bank to hold rate steady at FX auction – traders
Central Bank of Egypt -YOUM7 (Archive)

Egypt’s central bank will hold the exchange rate steady at 7.7301 to the dollar on Thursday at its first foreign exchange sale since the U.S. Federal Reserve raised interest rates, traders said.

Egypt, which depends on imported food and energy, is facing a dollar shortage and mounting pressure to devalue the pound as a black market in dollars has flourished.

The rise in the U.S. interest rate is likely to add further downward pressure on the currency unless the Egyptian central bank unexpectedly follows suit at its monetary policy meeting on Thursday.

Though the central bank has sought to inject additional forex liquidity into the market over the past month, the gap between the official and black market rates remains large.

On the parallel market, the dollar was little changed at 8.58 pounds on Thursday, a black market trader said.

Egypt has been starved of foreign currency since a popular uprising in 2011 ousted then-president Hosni Mubarak and hit tourism and foreign investment.

Central bank forex reserves have tumbled from $36 billion before the 2011 uprising to $16.4 billion in October, as it has spent dollars on food and petroleum imports and sought to defend the pound at an artificially strong level.

In February, the central bank imposed capital controls, limiting dollar-denominated deposits to $50,000 a month in an attempt to fight the black market.

The move caused problems for importers, which could no longer source enough foreign currency to pay for their goods.

On Sunday Egypt’s central bank injected $750 million to $1 billion into the banking system in a surprise operation aimed at clearing imports, the head of the Egyptian Federation of Industries Mohamed El Sewedy told Reuters.

Last month the central bank injected an initial $1 billion in a similar operation.

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