Egyptian Pound Sinks to Record in Black Market Amid Crackdownby
Government has been closing down local money managers
Dollar shortage forces buyers to pay premium in black market
Egypt’s pound fell to a record in black-market trading on bets the currency has further to weaken amid a central bank crackdown on local money changers.
The pound dropped to 10.036 per dollar on Tuesday, according to the average of five quotes from dealers in Cairo and Alexandria, down 3.5 percent from a week earlier. That compares with an official price of 8.88 a dollar. The black-market rate strengthened to as much as 9.2 after the central bank devalued the currency 13 percent this month. It has since lost all of its gains.
Two weeks after devaluing the currency the most in more than a decade and vowing to adopt a more flexible exchange rate, North Africa’s biggest economy is still reeling from a dollar shortage that’s forcing buyers to pay a premium for the greenback outside the banking system. The central bank has put foreign exchange businesses under more scrutiny to bring prices down, closing those that violate its regulations.
“The parallel market is piggybacking on the notion of a more flexible exchange rate going forward, betting on more weakness in the currency,” said Hany Farahat, senior economist at Cairo-based CI Capital Holding, a unit of the country’s biggest publicly traded lender. The market “is also pricing in the risk of more shutdowns of currency-exchange businesses as the central bank’s approach has become more aggressive in going after them, which has an impact on the total supply of dollars,” he said.
The central bank sold $120 million to lenders on Tuesday to alleviate the backlog of multi-national companies’ purchases of staple and pharmaceutical goods. The regulator has pumped about $2.9 billion into the market this month, or about six times the amount of dollars it usually sells.