Regional

Egypt’s pound strengthens after muted Friday protests

A vendor poses for a photo at his street vegetable stand at the Suleiman Gohar market in the Dokki district of Cairo, Egypt, Monday, Aug. 26, 2013. (AP Photo/Manu Brabo)

CAIRO: The Egyptian pound strengthened on the black market Monday as fears the country might be sliding into a period of sustained violence eased after a protest Friday passed relatively peacefully, traders said.

The pound had dropped late last week ahead of mass demonstrations called for Friday to protest against the dispersal by security forces of a sit-in on Aug. 14 of supporters of deposed President Mohammad Morsi.

“It was only the panic there might be Friday riots. Once they finished peacefully everything went back to normal,” said a forex trader at a Cairo-based bank.

The dispersal of the sit-in and the riots it triggered left more than 900 people dead, prompting nervous companies to switch into dollars.

The official price of the pound weakened at a central bank currency sale Thursday.

On Monday, black market dealers were offering to buy dollars for about 7.15 Egyptian pounds and sell them for 7.20 pounds compared to 7.20 and 7.25 pounds Thursday, currency traders said.

The pound had weakened on the black market to as low as 8.05 per dollar early this year as the country drained foreign reserves – already low following a plunge in foreign investment and tourism due to turmoil since the country’s popular uprising in early 2011 – to support the currency.

Black market trading volumes, however, shriveled after the army deposed Morsi on July 3 and the subsequent arrival of $5 billion of aid from Gulf Arab states to top up the country’s reserves.

Much of the black market activity is conducted in the back offices of licensed exchange shops.

The $5 billion in Gulf aid has helped the central bank to support the pound and the pound’s official price, controled by the central bank, has been appreciating slowly since Morsi’s overthrow.

Traders say the central bank is ensuring the pound strengthens to give the impression the economy is stable and improving despite the turmoil.

The central bank sold $37.6 million and the cutoff price was 6.9764 Egyptian pounds per dollar versus 6.9768 at a sale Thursday, the central bank said. The cutoff price on July 3 was 7.0184.

The bank had offered $40 million.

The central bank introduced currency sales, held three times a week, at the end of December to help to stave off a currency crisis and thwart a run on the pound.

Since then, the central bank has allowed the currency to lose more than 11 percent of its value on the official market. The currency’s value has been under pressure since the 2011 popular uprising chased away tourists and foreign investors.

 
A version of this article appeared in the print edition of The Daily Star on August 27, 2013, on page 6.

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