CAIRO (AP) — Egypt's currency fell for the fourth time in a week on Wednesday, hitting its lowest point ever against the dollar, in a development that could help boost foreign investment after four years of unrest.
The central bank set a cutoff rate of 7.34 Egyptian pounds per dollar in an auction that sold $38.4 million, compared to a rate of 7.29 a day earlier. Before this week, the exchange rate had not changed for six months.
Investors and economists see the currency as overvalued and local demand for dollars has fueled a thriving black market. On Wednesday, traders were buying dollars at rates of 7.80 to 7.94 pounds.
"Almost all other currencies in the world had weakened against the dollar over the past six months," said Simon Kitchen, a strategist at Egypt's EFG Hermes bank. "It was surprising that Egypt had not let its currency move. This is sort of catching up, I suppose to some extent, with the rest of the world."
"I think it's a sign that the central bank is trying to eliminate the black market," he said, a move investors would welcome.
Political unrest since the 2011 ouster of longtime autocrat Hosni Mubarak has battered the Egyptian economy, leaving the vital tourism industry in tatters and making it difficult to attract foreign investors.
The government is reforming investment laws in an attempt to improve transparency and slash Egypt's notorious red tape. A major investment conference is scheduled for March.
Economist William Jackson from Capital Economics in London said the currency drop could reassure investors concerned about lingering instability.
"People have been hesitant to invest in Egypt while the currency may weaken. If you put your money into Egyptian pounds and they depreciate by 20 percent you've suddenly lost 20 percent in U.S. dollar terms," he said.
Cairo has grown to rely on massive influxes of aid from Saudi Arabia, Kuwait and the United Arab Emirates to keep its economy afloat and buttress the state budget, which is deep in deficit.
Its foreign reserves stand at less than half the $36 billion held before 2011, just enough to cover around three months of imports — a level economists consider a bare minimum.
The currency move could also help generate more revenue from markets in the European Union, Egypt's main trading partner, by making Egyptian exports more competitive, Jackson said.