Egypt is almost “back to square one” after euphoria following the biggest EGP devaluation in 13 years faded away, longtime business and finance writer Ahmed Namatalla writes for Bloomberg. A survey showed that FX bureaus are selling USD at a 22% premium to the official rate. Holders of USD will only “give them up if they feel like there’s enough of a reward or if they expect their value to decline. Neither is the case right now,” a strategist at Global Evolution Fonds told Namatalla. Egyptian officials appear hesitant to relinquish the control over the exchange rate as devaluations can be inflationary. However, HSBC’s Simon Williams hints that a free-float regime is the way to stabilise the market; “the market is looking for the value of the pound to be set by the aggregate of supply and demand, not by the central bank … If that isn’t taking place, then it’s no surprise markets are disappointed.”

…In an increasingly less-rare policy statement, Central Bank Governor Tarek Amer says he has no intention of devaluing the EGP further, according to remarks carried by state news agency MENA and picked up by Al Masry Al Youm. Amer also denied there are any agreements with “foreign entities” over what the exchange rate should be, saying the large premium in the parallel market is caused by speculation.

… Amer’s comments had no effect on the market as the exchange rate continued to spiral in the parallel market. Al Mal says the parallel market market rate yesterday was EGP 11.10 per USD 1, Al Borsa puts it at EGP 11.15, and Al Watan quotes a rate of EGP 11.75. Reuters’ survey of the market has the rate even weaker at EGP 11.35 per USD 1 and blames the drop on USD hoarding. “Traders at exchange bureaus are holding on to their USD as the price could go sharply higher the next day,” one forex trader told the newswire, with Naeem’s Allen Sandeep blaming this behaviour on an expectation that there will be another devaluation, “it’s a chicken and egg situation.”!

In response to what it sees as hoarding by FX traders, the CBE intensified its crackdown on money changers, revoking the licenses of nine dealers on Wednesday, Al Mal reports. It has been proven that these bureaus are responsible for repeated violations of CBE regulations on the exchange rate, said Deputy CBE governor Gamal Negm. By law, the CBE has the right to revoke licenses of bureaus who do not comply with regulations and is working on amendments to the CBE Act that would allow it to have prosecutors bring criminal charges against individuals found manipulating the market