CAIRO: Central bank of Egypt has widened the band in which banks can trade dollars to 10 piasters above or below the official rate, up from 3 piasters.
Egypt has been attempting to tackle a flourishing black market in the pound by allowing for the gradual depreciation of the currency over the past two weeks, raising expectations for a less interventionist approach to managing the pound.
The central bank’s decision to allow for a wider band for trading in dollars prompted the rate at which Egyptian banks sell dollars to their clients to weaken to 7.59 pounds per dollar, bankers said, it’s weakest level ever. Earlier on Thursday, Egypt’s central bank had allowed the pound to weaken to an official rate of 7.49 per dollar at a dollar auction, the weakest level it has been allowed to reach since auctions began in December 2012.
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, though there remains an active black market in the pound. Expectations that the bank will devalue have grown since it announced a surprise 50-basis-point cut in benchmark interest rates earlier this month. The bank said plummeting global oil prices had eased the inflation outlook.
