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Egyptian pound holds steady

Egypt's pound sold for 7.53 per dollar at Thursday's central bank auction, and has now held at that level for three consecutive days, after weakening steadily since the middle of last month. The bank has let the official exchange rate weaken since January 18 in a bid to wipe out the black market as part of economic reforms designed to reinforce a nascent economic recovery and burnish the country's image ahead of an investment conference in March when Egypt hopes to attract foreign investment.

The central bank said it offered 40 million dollars at auction on Thursday and sold 38.4 million at a cut-off price of 7.5301 pounds per dollar, the same price at the previous sale on Wednesday. The rates at which banks are allowed to trade dollars are determined by the results of central bank sales, giving the bank effective control over official exchange rates.

It was unclear whether the central bank would allow the pound to weaken further. There remains an active black market in the pound. The gap between the official and unofficial exchange rates has begun to narrow after months of widening but as the rates quoted on the black market fluctuate daily it is difficult to gauge whether the central bank's strategy is working.

A trader on the unofficial market said the pound was changing hands at 7.90 pounds per dollar on Thursday, down from the rate of 7.95 quoted a day earlier. As well as letting the pound depreciate, the central bank gave banks permission late last month to widen the band around the official rate at which they can trade dollars, in a bid to stamp out the black market.

Copyright Reuters, 2015