February 5, 2015 / 5:23 PM / 5 years ago

Egypt central bank imposes cap on dollar deposits

CAIRO, Feb 5 (Reuters) - The Egyptian central bank has struck another blow against the country’s unofficial currency market, with a cap on the amount of dollars that can be deposited in banks, private bankers and a central bank source said on Thursday.

The cap on deposits should discourage use of the black market by depriving those who want to exchange dollars outside official channels of a place to keep their funds.

The cap is the latest step in efforts to curb the black market. In the past three weeks, the central bank has allowed the pound to depreciate after six months of stability and given banks a wider band around the official rate in which to trade dollars.

Now it is limiting dollar deposits in banks to $10,000 a day or a total of $50,000 a month. The new limits came after a meeting on Wednesday between the central bank governor, Hisham Ramez, and leaders of Egyptian banks, private bankers and a central bank source told Reuters.

The action was aimed at combating money laundering as well as “the final elimination of currency trading and an end to the parallel market’s dealings,” the central bank source said.

Egypt wants to get the pound to a level the market sees as fair, as part of a raft of economic reforms it hopes will burnish its image before a major investment conference in mid-March.

A shortage of dollars has grown more acute in the past four years. Political and economic turmoil after a 2011 uprising has disrupted tourism, a key source of hard currency.

The Egyptian pound has stabilised at 7.53 pounds to the dollar at the last three central bank dollar auctions, after two-and-a-half weeks of depreciation from its long-time rate of 7.14 per dollar.

The rates at which banks are allowed to trade dollars are determined by the results of central bank sales, giving the bank effective control over official exchange rates.

But the central bank last week gave banks more flexibility, widening the price band in which banks can trade dollars to 0.10 pounds either side of the official rate. That is more than triple the previous range of 0.03 pounds more or less than the official rate.

Black market traders and private-sector bankers said Thursday’s decision had narrowed the gap between the official and unofficial rates. Some traders said they were selling dollars at the same rate as the central bank.

Others said the were selling at 7.90 to the dollar, still closer to the central bank’s rate than the previous day’s price of 7.95 pounds. (Writing By Shadi Bushra; Editing by Larry King)

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