The push to finalize the loan comes as Egyptian banks on Sunday began freely trading foreign exchange on the interbank market for the first time, writes Bloomberg’s Ahmed Feteha. USD 15.8 mn was traded on Sunday, considered low by some analysts. This is to be expected given that banks have been starved of FX, said Reham El Desoki, senior economist with Dubai-based Arqaam Capital. “The central bank will probably wait and see how the system works in terms of self-financing” before deciding whether to inject liquidity into the market. According to the CBE, the average exchange rate in the banking sector shows greenbacks changed hands at EGP 16.32 on Sunday.

“Black market volumes were low on Sunday,” Reuters reports, noting, “most traders waited to see how the interbank system would operate, but some [transactions] were done at 17 to 17.25.”

With 12-month non-deliverable forwards shown at EGP 16.85 to the greenback on the screen behind him, Bloomberg’s Alaa Shahine appeared in-studio on the business information service’s morning show to discuss the float (watch, run time: 2:42). Renaissance Capital’s Ahmed Badr was also on the show yesterday, suggesting that with everyone expecting EGP 11.00-13.00 as a fair value, it’s natural for the EGP to “overshoot to 16 … is it going to overshoot to 18? … The central bank is trying to get liquidity from a black market flush with liquidity into the banking sector. That’s going to take time, since you have a lot of demand and very little supply, to attract the supply, it has to overshoot. I think it’s going to be quite unstable” in the coming days, he says. Watch (run time: 6:04). Badr is worth watching — if you can tolerate the male anchor: “There’s history to go by — a drastic debut — Egypt the accolade it has been awarded is the worst — you can call it whatever you want. You call it a free float, I call it a devaluation [inaudible] buddy, but Egypt on day one, it’s a pretty solitary affair.” Trenchant.

We may not yet have hit a market-clearing rate. If yesterday was about anything, it was about testing the boundaries. The EGP avoided a sharp drop yesterday on first day in free float “because years of [USD] shortages had starved the market of liquidity,” Asma Alsharif and Eric Knecht write for Reuters. “Logically, if it is a properly functioning market, the natural thing would be for the price of dollars to keep rising, until flows comes in from outside the banking system … That is not happening now — all banks are just holding on,” one banker said, adding that he believes the central should inject more USD to the market. Edita’s Chairman Hani Berzi said: “If you ask me today, I would say no, banks don’t have enough supply of foreign currency. But I think it will stabilize in the next few weeks or months.”

Prepare for a “currency rollercoaster” in the coming days, Reuters says. The newswire says “activity was extremely slow [yesterday] because banks were uncertain about the prospects for supply and demand” of USD. It adds that people are expecting a further EGP devaluation as banks will struggle to meet the USD demand backlog. Banks are reportedly prioritising covering the import backlog for strategic goods over other importers’ requests, Al Mal reports, citing market sources, with others saying FX bureaux are being “more flexible.” One banker was dismissive of all efforts, telling Reuters yesterday: “People do not know how to trade FX in a free market yet. I’d say it will touch 18 before the end of the day if anyone is offering … Activity will pick up [on Monday], irrespective of what happens today."

How much FX is flowing into the banking system? Al Mal tries to crunch the math (with little success) and Al Masry Al Youm suggests that there must be some inflows if Banque du Caire can raise its limits on the amount of FX travelers can buy before flying.