Egypt’s currency drops to new low against the dollar

06/07/2015 07:57 AST

Egypt's central bank says the Egyptian pound has fallen to a new low against the dollar, its second such drop since Thursday.

The central bank set a cutoff rate of 7.73 Egyptian pounds per dollar in an auction that sold $39.6 million on Sunday, compared to the previous rate of 7.63.

Before Thursday's auction, the pound had held at 7.53 since February. The new rate could help boost much-needed foreign investment. Investors and economists see the currency as overvalued although the central bank has taken steps to alleviate the discrepancy, allowing the pound to slide somewhat before an investor summit last March.

This is the lowest level the Central Bank of Egypt (CBE) has allowed the local currency to reach since auctions started in December 2012, amid expectation of further devaluation in the coming days.

“The bank offered $40 million and sold 39.6 million at a cutoff price of 7.73 EGP per dollar,” the central bank said on its website Sunday.

The central bank usually holds foreign exchange auctions on Sunday, Tuesday and Thursday every week. Such auctions determine the rates at which banks can sell the dollar to clients.

The dollar was sold at banks at 7.83 EGP on Sunday, 0.10 EGP above the official rate.

Egypt’s pound had held steady at 7.53 per dollar for five straight months after the CBE allowed it to weaken against the dollar in 10 consecutive depreciations as part of its fight against the dollar black market.

The central bank also imposed a $10,000 daily ceiling for cash deposits in hard currency, depriving those exchanging their dollars outside the official market from a safe place to deposit their cash.

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.

The International Monetary Fund’s (IMF) Director of the Middle East and Central Asia Department Masoud Ahmed, welcomed Egypt’s central bank procedures to address the parallel market.

Having a unified market “would help create the basis for more investment, and better functioning of the exchange markets, and as a result encourage investment and growth,” Masoud said on the sidelines of the World Bank Group and IMF 2015 annual spring meetings in Washington, D.C in April.

Saudi Gazette