Egyptian banks suspend debit card use in foreign currency
reuters.com
reuters.com
As a foreigner, it may make sense to short the Egyptian pound versus a stronger currency like the USD and potentially get rich in the same way George Soros when he bet against the British pound in 1992 which was propped up by the Bank of England then.
Usually when there’s a currency arbitrage opportunity, locals will circularly exploit the currency arbitrage (potentially by exchanging pounds with an Egyptian bank for 10% more USD or perhaps another way) until the government spends more of it’s foreign reserves than it feels comfortable spending and simply can’t hold down the peg any longer.
Who are you going to borrow egyptian pounds from to pull this off? The egyptian central bank certainly won't do it, and any third party is going to charge you the black market rate (ie. the true market rate), which wipes out any profits you might make.
>Usually when there’s a currency arbitrage opportunity, locals will circularly exploit the currency arbitrage (potentially by exchanging pounds with an Egyptian bank for 10% more USD or perhaps another way)
Usually you can't pull that off because the central bank won't sell foreign currency to just anyone. You have to have a valid reason, or be well connected.
The only way to get dollars at the official rate is to import goods from abroad, so you can pay the central back in pesos and they settle the invoice with dollars.
Of course, you can only do this if you have connections, otherwise you will be waiting for a long long time (months probably) until your request is approved.
EDIT: Forgot to mention that you can still use a local debit or credit card to make purchases abroad. You will have to pay around $650 pesos for each dollar. The government taxes the heck out of every purchase abroad to discourage people from spending. Still there's a gap, so people use it while they can.
For a specific answer, that’s a question for another HN’r to answer. Broadly though, a brokerage that supports FOREX will let you short currencies and potentially buy call or put options on the given currency pair. If I was planning on doing this, I’d keep it a secret and you wouldn’t hear me post about it so quickly, until I already had built a position.
> Usually you can't pull that off because the central bank won't sell foreign currency to just anyone. You have to have a valid reason, or be well connected.
No, you can look it up for yourself anywhere and see that’s the official exchange rate, not a “special” exchange rate like Venezuela has (which people friendly with the government make money arbitraging). Don’t be so quick to be dismissive. It’s something for curious local Egyptians to evaluate and consider.
That might work if you're trading euros or japanese yen, but can you do it for egyptian pounds? For instance, IBKR does a bunch of currencies but not EGP
https://www.interactivebrokers.com/en/trading/products-spot-...
Wise will let you convert from USD to EGP, but not the other way around.
>Don’t be so quick to be dismissive. It’s something for curious local Egyptians to evaluate and consider.
Why do you think the "black market rate" exists in the first place then? If you can really walk in a bank and get $1 USD for 31 egyptian pounds no questions asked, why would there even be a black market where people are asking for 40 egyptian pounds for the same dollar?
Edit: yes, exactly
So where's the money making opportunity? You're short selling at the market (ie. non-official) rate, and have to buy back at the market rate. The only way you'll make money is if the market rate drops even more, but whether that happens is uncertain. This just sounds like run of the mill currency speculation.
Doesn't sound so fixed
The massive profitability of this scam resulted in a number of Miami condo sales.
Reading the article:
> A substantial number of debit card holders had been using cards to make bulk purchases, often in the United Arab Emirates, of gold, mobile telephones and other products to take advantage of the Egyptian pound's low official exchange rate.
Looks like a similar arbitrage was going on here. I predict they will introduce more capital controls to stop bleeding forex reserves, which won't work and then they will eventually be forced to float the currency, resulting in massive inflation that will stabilize in a year or two. Or they'll just continue on like Argentina and let their economy languish because they refuse to recognize economic reality.
https://en.wikipedia.org/wiki/Rafah_Border_Crossing
https://www.aljazeera.com/news/2023/10/9/rafah-crossing-betw...
Economy collapses are more like a reality check when a country has to cease the unhealthy practices it was engaged in, and eat a humble pie. They are not like statehood collapse.
It's a pity that Russia has just one able-minded turkic woman with a collection of brooches[1]; we could rent out these services for a fee that would indeed compete with oil profits.