The Central Bank of Egypt (CBE) will likely hold an auction to sell dollars to local banks before 30 June, a senior banking source told Al-Masry Al-Youm, the day on which mass protests will demand early presidential elections.
The planned protests, which have also called for President Mohamed Morsy's departure from power, could cause the price of the dollar to rise.
The exchange market and the black market are anxiously anticipating demonstrations as they seek to capitalise on gains from the expected rise of the dollar against the Egyptian pound.
On Monday, the CBE invited a tender to sell US$40 billion to local banks. Tenders were first used by the CBE in December following unprecedented surges in the value of the dollar against the pound in exchange markets, a phenomenon that negatively impacted dollar liquidity.
Bankers say that, as the scheduled protests approach, black market traders are anticipating exactly when an upwardly mobile dollar would benefit them most. However traders are also wary that the CBE could inject an additional supply of dollars onto the market.
Meanwhile, Bassant Fahmy, a banking expert, said that the CBE no longer needs to inject more dollars to bolster the Egyptian pound's value, a strategy that would squander currency reserves.
The price of the pound against the dollar should be determined by the laws of supply and demand, she added.
Foreign currency reserves climbed from $14.4 billion in April to $16 billion in May, marking the highest monthly increase since the January 2011 revolution.
Mohamed al-Abyad, chairman of the exchange sector at Egypt's Federation of Chambers of Commerce, said that black market traders exploit bouts of political tension to raise the price of the dollar while creating manufactured demand for it.
However, Abyad does not expect the price of the dollar to rise in anticipation of the protests because traders are too fearful that the CBE will inject an additional supply of dollars to the market.
Edited translation from Al-Masry Al-Youm
