CAIRO: The Egyptian pound held steady against the dollar at an official foreign currency auction on Tuesday but weakened on the black market, after reports that the central bank raised a cap on foreign currency deposits at banks to support exports.
Egypt, which depends heavily on imports, is facing a foreign currency crisis and is under increasing pressure to devalue the pound, but the bank surprised markets when it strengthened the pound by 20 piasters in November and held it steady ever since.
In a bid to fight a black market for dollars, the central bank imposed a cap of $50,000 a month on deposits at banks a year ago. It later raised that to $250,000 for the imports of essential goods.
On Monday, the central bank raised the cap to $1 million for exporting companies, in an effort to ease restrictions that led to manufacturing components piling up at ports. The reaction was increased demand for dollars in the black market.
The central bank sold $38.8 million at a cut-off price of 7.7301 pounds to the dollar on Tuesday, unchanged from the previous auction.
The official rate is still far stronger than the black market rate, which weakened to around 9.05 pounds per dollar on Tuesday from around 8.85 pounds on Sunday.
Egypt has been starved of foreign currency since an uprising in 2011 ousted autocrat Hosni Mubarak but drove tourists and foreign investors away.
Its foreign currency reserves have tumbled from $36 billion in 2011 to $16.48 billion at the end of January, and the country has been rationing dollars through the weekly dollar auctions to banks, keeping the pound artificially strong.
The bank's Monetary Policy Committee raised benchmark rates by 50 basis points last month, citing inflationary pressures.
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