The Egyptian pound was flat at a central bank dollar sale on Wednesday but was volatile on the black market as a surge in commercial demand for dollars added to concerns over Egypt's plans to repay a US$2.5 billion Qatari deposit, traders said.
The bank offered $40 million on Wednesday and said it had sold $37.6 million at a cut-off price of LE7.1401 per dollar, unchanged from its last sale on Monday.
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.
In the unofficial market, traders reported significant volatility. One trader quoted the pound at about LE7.75 to the dollar at midday, weaker than Monday's rate of LE7.67 and a marked decline from around LE7.57 on Thursday.
The trader said a major surge in demand for dollars from a single large company early this week had forced exchange brokers to scramble for hard currency, driving up the price in recent days and creating volatility on the unofficial market.
"This commercial demand created the shortage," he said.
Another trader said pressure was beginning to ease, having peaked late on Tuesday. Black market rates were being quoted at levels as divergent as 7.55 and 7.68 by Wednesday afternoon.
Huge demand for dollars to finance imports of food, fuel and manufactured goods often creates shortages in Egypt, which can drive up unofficial rates, particularly ahead of holidays or at certain points in the financial calendar.
Economic and political uncertainty has also raised currency pressures since the 2011 revolt, boosting a black market that had dwindled during years of growth.
"There is pressure because of the Qatari deposit," said the head of foreign exchange at one Egyptian bank. "You are talking about a country where there is a cashflow deficit. Imports exceed exports so there is an imbalance."
Egypt said it would repay a $2.5 billion deposit to Qatar this month, bringing to $6 billion the deposits it has returned to the gas exporter that supported President Mohamed Morsy of the Muslim Brotherhood.
Egypt's ties with Qatar have soured since the army overthrew Morsy last year, although the move unlocked billions of dollars in aid pledges from other Gulf countries who oppose the Brotherhood.
A government source said this month Egypt had received $1 billion from Kuwait, prompting market concerns that new aid would not cover outflows of foreign currency.
