#Egypt’s Pound Slumps in Black Market as Official Market ‘Frozen’

The Egyptian pound weakened in unregulated trading, with investors paying the highest premium to buy dollars in five months, amid tight official control of the local currency.

The pound depreciated to 7.2970 per dollar, according to the average of three quotes from money changers in Cairo surveyed by Bloomberg. The dollar price translates into a premium of 6 percent to the official interbank rate, up from a year-low of 1.3 percent reached in August and the highest since July 3, according to weekly surveys.

The local currency is falling amid a shortage of dollars that hasn’t impacted pricing at central bank dollar auctions, which pump almost $120 million into banks every week. The pound, whose movement in the interbank market is controlled by the central bank, reversed six months of losses in July as billions of dollars of aid flowed in from Persian Gulf countries after the military retook power in Egypt.

“Because the official market is frozen in a way, investors are going to protect themselves by turning to the black market,” Benoit Anne, the London-based head of emerging-market strategy at Societe Generale SA (GLE), said by phone. “If there’s too much divergence, the central bank will have to rectify the situation at some point.”

The pound was unchanged in interbank trading at 6.8873 a dollar, having appreciated less than 0.1 percent since the start of October, according to prices compiled by Bloomberg. That pares its loss to 11.3 percent since the central bank started dollar auctions almost a year ago to ration the use of its foreign reserves.

The yield on the government’s benchmark 5.75% Eurobonds due April 2020 slid three basis points to 7.22% by 1:16 p.m. in Cairo, the lowest on a closing basis in more than a month, according to data compiled by Bloomberg.


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