Egypt's central bank kept the pound steady at 7.7301 pounds to the dollar at its official foreign currency auction on Tuesday, five days after it raised benchmark interest rates by 50 basis points. The rate was steady on the black market as well.
Egypt, which depends on imported food and energy, is facing a dollar shortage and mounting pressure to devalue the pound. The central bank surprised markets when it strengthened the pound on November 11 by 20 piasters against the dollar. On Tuesday, it sold 39.1 million dollars at a cut-off price of 7.7301 pounds to the dollar, unchanged from Sunday.
The official rate is still far from the black market, which was around 8.58 pounds to the dollar on Tuesday, unchanged from Sunday. The country has been starved of foreign currency since a popular uprising in 2011 ousted autocrat Hosni Mubarak and drove tourists and foreign investors away. Egypt's reserves have tumbled from $36 billion in 2011 to$16.4 billion, and the country has been rationing dollars through weekly dollar auctions to banks, keeping the pound artificially strong.
In February, the central bank imposed capital controls, limiting dollar-denominated deposits to $50,000 a month in an attempt to fight the black market. The move caused problems for importers, who could no longer source their foreign currency needs.
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