Egypt’s pound fell to 19-month low in the black market amid concern the forthcoming $2.5 billion bond payment to Qatar may drain foreign-exchange reserves.
The currency dropped in unregulated trading to 7.70 against the dollar, its lowest level since April 2013 and compared with 7.58 a dollar last week, according to the average of four quotes from money changers surveyed by Bloomberg. That represents a premium of 7.7 percent to buy dollars over the interbank rate of 7.1501, which is controlled by the central bank. The pound’s official price hasn’t changed for more than five months and is down 2.8 percent this year.
The Nov. 28 deadline for Egypt’s repayment of a $2.5 billion bond to Qatar is spurring speculation on the currency, said Hany Farahat, senior economist at Cairo-based CI Capital. Egypt had borrowed the money as part of an $8 billion assistance from Qatar in 2013 to support its budget under former President Mohamed Mursi, just weeks before he was overthrown.
The pound’s drop “certainly represents a hefty black-market premium compared to the currently prevailing official rates, and if it prevails, it might pose downward pressure on the latter,” Farahat said by phone. Companies are also setting aside foreign exchange to prepare for 2015 needs, he said.
Also, the regulator shut down 12 foreign-exchange businesses on the grounds they violated currency-trading rules, Al Masry Al Youm newspaper reported Nov. 13, two days after Central Bank of Egypt Governor Hisham Ramez pledged to combat unofficial trading.
The central bank sells about $40 million dollars to local banks three times a week. The auction system was put in place in December 2012 to ration dollars after foreign-exchange reserves fell to $15 billion, less than half their level before the start of political turmoil in 2011. That figure stood at $16.9 billion in October, enough to cover more than three months of imports, according to Bloomberg calculations.
Source: Bloomberg
