Egyptian Pound Dips in Black Market as Revolt Anniversary LoomsAhmed A. Namatalla
Egypt’s pound fell in unregulated trading as the central bank halted its decline in the official market before the anniversary of the country’s 2011 uprising.
The pound retreated to 7.379 per dollar in the black market from 7.36 last week, according to the average of three quotes from money changers surveyed by Bloomberg. That represents a 6 percent discount versus the official interbank rate and compares with 5.7 percent last week. The central bank has kept the pound little changed at four currency sales since Jan. 8 after allowing it to drop 1.1 percent in the previous three weeks.
Confidence in Egypt’s currency is waning in the run-up to the third anniversary of the revolt that ended Hosni Mubarak’s 30-year rule, with both Islamist and secular groups planning rallies against the current military-backed government. The spread between official and black market currency rates narrowed to less than 5 percent at the end of December from almost 8 percent two weeks earlier.
“The gap is widening because the pound’s official price is being held by the central bank and people are growing more concerned of possible violence on Jan. 25,” Sherif Othman, Cairo-based head of treasury at Arab Bank Corp., said by phone. “Despite the relatively small size of the black market, it’s one of the factors that influence the central bank’s decisions to strengthen or weaken the currency.”
The shortage of dollars in Egypt is estimated at as much as $700 million a month, Mohamed Abu Basha, a Cairo-based economist at EFG-Hermes Holding SAE, the country’s biggest investment bank, said last month. It intensified after the central bank’s Dec. 2012 decision to ration foreign reserves by holding currency auctions, pushing the premium for dollars in the unofficial market to as high as 15 percent in April.
The yield on the country’s 5.75 percent dollar bonds due April 2020 retreated four basis points, or 0.04 percentage point, to 6.06 percent at of 1:32 p.m. in Cairo, according to data compiled by Bloomberg. That’s the lowest on a closing basis in almost a year.
Dealers who participate in Bloomberg’s weekly surveys ask not to be identified because trading outside official rates is illegal.