Egypt pound drops as banks suck up black mar­ket dol­lars

Kuwait Times - - BUSINESS -

Egypt’s pound weak­ened yes­ter­day as dol­larstarved banks bought hard cur­rency from the black mar­ket to meet de­mand from im­porters and other com­pa­nies af­ter Egypt ditched its cur­rency peg last week. The pound was quoted at 17.60-17.90 against the dol­lar in the in­ter­bank mar­ket at 3:26 p.m. (1326 GMT), af­ter trad­ing at an av­er­age of 16.83 on Mon­day, but vol­umes were tiny as a se­vere dol­lar short­age sti­fled liq­uid­ity.

But bankers said vol­umes were be­gin­ning to im­prove as banks sourced more dol­lars from the black mar­ket, suck­ing for­eign ex­change back into the for­mal bank­ing sys­tem. “The vol­umes of dol­lar in­flows to the banks are in­creas­ing, rel­a­tively speak­ing, com­pared to when there was cen­tral bank in­ter­fer­ence,” said one banker.

“The num­ber of trans­ac­tions we are ex­e­cut­ing with clients is in­creas­ing daily. All these are good signs, re­gard­less of the weak­en­ing pound. This is the only way to at­tract dol­lars back into the bank­ing sys­tem.” The cen­tral bank aban­doned the pound’s peg of 8.8 to the dol­lar on Thurs­day, float­ing the cur­rency in an ef­fort to at­tract in­flows of cap­i­tal and crush a boom­ing black mar­ket in dol­lars. Im­port-de­pen­dent Egypt has strug­gled to at­tract dol­lars and re­vive the econ­omy since the 2011 up­ris­ing that ended Hosni Mubarak’s 30-year rule drove away tourists and for­eign in­vestors, es­sen­tial sources of hard cur­rency.

As main­tain­ing the cur­rency peg drained its for­eign re­serves, Egypt im­posed cap­i­tal con­trols and ra­tioned dol­lars, forc­ing im­porters to turn to the black mar­ket for their needs. Mean­while, or­di­nary Egyp­tians kept dol­lars stashed un­der mat­tresses as a hedge against in­fla­tion that has soared above 14 per­cent. This starved the bank­ing sys­tem of hard cur­rency. Since the pound was floated, banks have been open­ing daily un­til 9 p.m. to accept dol­lar de­posits and sales. The gov­ern­ment has run mes­sages on Egyp­tian ra­dio call­ing on the pub­lic to shun the black mar­ket and use the banks.

It is not clear how many dol­lars have come into banks since the float, but bankers and busi­ness­peo­ple said some black mar­ket deal­ers had been forced to sell dol­lars into the bank­ing sys­tem as they strug­gled to find buy­ers. “I don’t think peo­ple will jump right back to the black mar­ket be­cause the banks are try­ing to get the liq­uid­ity form the black mar­ket as well,” one com­modi­ties trader said yes­ter­day. A banker said black mar­ket deal­ers were of­fer­ing dol­lars to banks for 18 pounds yes­ter­day. Some of those deal­ers had orig­i­nally bought dol­lars at or near those lev­els, and they were look­ing for op­por­tu­ni­ties to exit their po­si­tions with­out los­ing money. An­other com­modi­ties trader said he had been forced to go to the black mar­ket be­cause his bank was not able to sup­ply him with all the dol­lars he had re­quested. “I would pre­fer the bank. If I can get it from the bank, I will,” he said. — Reuters

Kuwaiti oil price up 18 cents to $40.33 pb

The price of Kuwaiti oil went up by 18 cents to $40.33 per bar­rel (pb) Mon­day as op­pose to $40.15 pb last Fri­day, said Kuwait Petroleum Cor­po­ra­tion (KPC) yes­ter­day. At the global level, the prices went up mainly due to the US Dol­lar hike and re­ports of OPEC cut­ting out­put. The Brent Crude price went up by 57 cents to set­tle at $46.15 pb. The price of the Amer­i­can crude also went up 82 cents to $44.89 pb.

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