The Central Bank of Egypt (CBE) sold dollars to banks at a slightly stronger rate of EGP8.78 pounds per dollar on Wednesday, six banking sources told Reuters, in an exceptional sale to cover temporary overdrafts of foreign currency at banks. The move was the first in the currency since the central bank devalued it by 13% to EGP8.85 to the dollar on Monday and announced a shift to a more flexible exchange rate regime. The central bank had announced on Tuesday it would sell USD1.5 billion on Wednesday in a move a central bank source said was aimed at "finishing off" the black market which had sucked up foreign exchange liquidity from the banking system. The central bank did not officially announce the rate. Officials at the central bank could not be reached for comment. Four bankers told Reuters that banks which received dollars at the sale were requested to deposit the same amount back into the central bank for one year at an interest rate of 1.2312%. "The bank's dollar liquidity is the same because we took the dollars and returned them to the central bank. They transferred the risk from the clients who have opened overdrafts to the central bank," one banker said.   Our comment: As highlighted by the banking sources, yesterday’s auction did not actually witness a cash injection by the CBE, but was rather more of an accounting exercise where it assumed liabilities of clients to provide banks back with foreign currencies they borrowed through temporary overdrafts. The liability has now moved to the CBE, in a third auction of its kind where it has assumed an earlier USD1.6 billion in the same format. In that respect, the liquidity pumped into the banking sector over the past two weeks stands only at cUSD1 billion. The driver behind the c1% appreciation of the USD-EGP in the auction remains unclear, coming only a couple of days following a much-awaited depreciation especially with the transaction not involving a cash transaction. We expect the appreciation to extend the period of wait-and-see by economic agents as they try to assess the drivers behind the CBE’s move. We keep a close eye on today’s regular FX auction to monitor any potential changes in the EGP’s value. (Reuters, Mohamed Abu Basha)