The Central Bank of Egypt (CBE) concluded the banking sector’s work week without changing the Egyptian pound’s exchange rate against the US dollar or launching an exceptional auction to sell US dollars to banks, unlike what the market was expecting.
Banks operations came to a halt on Wednesday, given that Thursday is a national holiday in remembrance of the 6 October war of 1973.
Over the past few days, the market’s expectations inclined towards the CBE floating the exchange rate completely or reducing the value of the Egyptian pound against the US dollar at a high rate through an exceptional auction to cover the requests of US dollars of bank customers.
Research centres in a number of investment banks said that the CBE has to take this step this week, particularly on Wednesday at the latest.
Contrary to all expectations, the CBE decided on Tuesday to launch a regular auction through which it sold $117.9m to banks only, and fixed the US dollar price at EGP 8.78.
On Wednesday, the market did not see any change in the official price of the US dollar and no exceptional auction was launched to sell dollars.
According to the vice head of the treasury sector in a foreign bank operating in the local market, Mohamed Hussein, the CBE’s decision to fix the dollar’s price and to not launch an exceptional auction now came in line with his expectations and the expectations of treasury officials in banks, unlike the expectations of the research centres in investment banks.
Hussein stressed that there is a devaluation of the pound against the dollar coming. However, the time of that devaluation cannot be expected; otherwise, it would lose the element of surprise which central banks are keen on when it comes to major decisions, such as changing the price of currencies.
Devaluating the pound will definitely be associated with Egypt obtaining the loan of the International Monetary Fund (IMF), as well as the other remaining amounts to finance the economic reform programme, according to Hussein.
He added that it is unlikely that the CBE will launch an exceptional auction to sell dollars now because of its keenness on maintaining the foreign exchange reserves and increasing them to $25bn by the end of this year, as CBE’s governor, Tarek Amer, said earlier.