Egypt’s Pound Falls to Black Market Record on Devaluation Bets

The Egyptian pound fell to a record low on the black market on speculation that policy makers will weaken the official exchange rate for the second time this year.
The currency dropped to 12.99 per dollar, according to the average quote of four dealers surveyed by Bloomberg in Cairo today. That’s a 1.9 percent decline from a week earlier and the weakest on record since the weekly poll began in 2013.

Dollars are becoming more expensive to buy for people and businesses in North Africa’s biggest economy amid a shortage in supply due to slumping tourism and exports. As officials seek approval from the International Monetary Fund for a $12 billion loan, analysts and investors are forecasting the government will end the pound’s six-month-old peg to the dollar by devaluing the local currency in the banking system or floating it.
"The general feeling is that devaluation is imminent," said Hany Farahat, senior economist at CI Capital, a subsidiary of Commercial International Bank in Cairo. "The black market premium will peak once devaluation occurs and will only start falling when foreign currency liquidity improves and capital controls are removed. Only then will the two rates converge."