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Comment by webninja | Hacker News Reader

> Debit card transactions are charged at the official rate of about 31 pounds to the dollar whereas on the black market a dollar sells for around 40 or 41 pounds. Egypt has kept its currency fixed against the dollar since March despite a widening gap with the black market rate.

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.

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>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 did.

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.

We have a similar situation in Argentina, with the exchange rate being around $350 pesos but the "black market" rate around $1,000.

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.

Western Union surprisingly gives the blue dollar rate here in Argentina so if you have access to a foreign bank account that is a decent way to do it. From what I can tell it tracks pretty closely to the rates on the “dólar hoy” website. On $500 transfers they charge $32.00 but you still come out ahead of the ATM or Credit Card conversion rates.

> Who are you going to borrow egyptian pounds from to pull this off?

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.

>Broadly though, a brokerage that supports FOREX will let you short currencies and potentially buy call or put options on the given currency pair.

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?

You can speculate on nonconvertible currencies with non-deliverable forwards. This is not offered by most retail brokerages.

Who's going to be your counterparty and why would they give you the "official" rate? The whole reason why there's an "official" rate and a "black market" rate is that the government has mandated one rate, but the broader market disagrees and has agreed on a different rate. The two never converge because the government requires you to jump through hoops to get the official rate, so people can't arbitrage the difference.

Banks I assume? You would get the market rate, not the official rate.

Edit: yes, exactly

> Banks I assume? You would get the market rate, not the official rate.

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.

Egyptian banks are charging 10% foreign currency availability fee already.

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