The gap has widened between the official and unofficial Egyptian pound exchange rates on Wednesday, with the pound dropping versus the dollar on the black market and staying stable on a central bank sale versus the dollar.
The dollar was at 7.40 pound on Wednesday’s black market having changed hands earlier at $1 to 7.35 to 7.37 pounds. That amount was even weaker than Tuesday’s, when the dollar was sitting at $1 to 7.25 early and 7.32 later in the day.
The pound strengthened on the black market following the victory in the presidential election in May of Abdel Fattah el-Sisi the former head of the army, who was officially sworn into office this past Sunday.
Traders predicted that the market would have a temporary appreciation of the pound, following the recent election. They cited hopes of more investment along with aid from the countries that are Gulf Arab, which already have given many billions to help hold off a collapse of the Egyptian economy.
The pound was trading as high as 7.50 against the dollar prior to the elections.
The country’s central bank said it sold more than $36.5 million at price of 7.14 on Wednesday, which was unchanged from Monday’s last sale. It offered $40 million.
Traders on Forex and economists described the decision by the central bank allowing the pound to weaken gradually since March as managed depreciation.
The bank has not announced why it has let its currency weaken.
Leaders in business cited that there needed to be clarity on the currency’s direction as a condition on further investment.
The rates that banks are able to trade dollars are made by results of the sales made by the central bank, giving the central bank an effective control over the exchange rates that are listed as “official.”
Egypt’s new president and his cabinet have a long road ahead of them as they attempt to put three years of turmoil behind them. The economy was propped up during that time by foreign aid, and now must start to work on its own.