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Egypt's central bank has taken extraordinary steps to prop up its currency and curb a black market in foreign exchange – but in back alleys and money changing shops around the country, illicit dealing continues to thrive.The Egyptian pound is officially trading between banks at 6.96 to the dollar, about 11 percent weaker than it was near the end of 2012, when the central bank launched its auction system as a way of rationing hard currency and protecting its reserves.Last December, the central bank took aim at a loophole in the official market by warning commercial banks that they were required to trade all foreign currencies, not just the dollar, at official rates.But some traders said this could backfire by encouraging commercial banks, finding it harder to make money on their sales of euros, to hoard foreign currency – thus driving even more customers into the black market.After a very large dollar auction in September, the gap between the official and black market dollar exchange rates narrowed to just 5 or 10 Egyptian cents, a trader said.This means the country's external position is still vulnerable, and the central bank remains unable to flood the official currency market with as many dollars as would be needed to make the black market irrelevant.
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