Egypt’s pound strengthens at banks as demand from importers eases

09/01/2017 05:36 AST

The Egyptian pound strengthened slightly at banks as demand for dollars by importers eased, bankers told Reuters on Sunday.

The dollar was being bought for around 18 pounds at most banks, down from around 19 last week. Banks were paying clients around 17.8 per dollar. “The demand for dollar is less,” said one banker.

“Banks have reached a point where they don’t need to keep raising prices to attract dollar inflows because there aren’t as many dollar requests by clients for the time being,” he said, adding that once demand picks up prices will start rising again.

Banks in Egypt had been raising the price to buy dollars from clients in order to attract inflows and cover requests from other clients seeking to buy dollars, but they say demand for dollars has eased over the past week.

Business activity in Egypt shrank for the 15th consecutive month in December, although at a slower pace than the previous month, as inflation caused purchase costs to rise at a near-record pace and new orders to drop as the Egyptian pound weakened against the US dollar, a survey showed on Wednesday.

While banks are prioritising imports of essential goods, private individuals are forced to buy dollars on the black market. Three traders on the black market said they were selling dollars at a range of 19.60-19.80 per dollar.

Egypt’s central bank abandoned its currency peg of 8.8 pounds to the US dollar on Nov. 3, hoping to unlock currency inflows and bring back foreign investors who were driven away after the 2011 uprising that ousted Hosni Mubarak.

Under the currency peg, dollar supplies were rationed by the central bank, forcing businesses to go to the black market for foreign currency. Bankers say it will take time for those dollars to be absorbed back into the banking system.

The currency peg drained foreign reserves, and analysts estimate the central bank is still around $10-15 billion short of the stock it needs.

Gulfnews