EghtesadOnline: As the curtains fell on the previous Iranian year on March 20 and the usual lull in the markets sets in during the ensuing holidays, few expected currency volatility.
However, a few days into the holidays, it emerged that the rial had slid to an all-time low against the dollar, with the exchange rate crossing the psychological threshold of 50,000 rials.
The rally started on March 26 when the Norouz holidays officially come to an end, but many businesses and government offices remain half-closed until April 2.
The foreign exchange volatility was not good news for the administration of President Hassan Rouhani who had hoped to put a similar but less intense turmoil that saw rial lose a quarter of its value within six months behind it, according to Financial Tribune.
Back then, the Central Bank of Iran scrambled to unveil a package to shore up the rial and prevent capital flows. Banks were authorized for two weeks to offer interest rates of up to 20% on fixed one-year deposits, against the previous 15%.
The bank also ordered lenders to issue rial-based foreign exchange bonds with yields of up to 4.5% and gold sales at attractive prices. At the time, some had criticized the measures and argued that it would waste previous efforts at bringing down interest rates and inflict extra costs on cash-strapped banks.
With the new volatility in full swing on March 28, CBI Governor Valiollah Seif posted a statement on his official channel on the popular messaging app Telegram where he reiterated his oft-repeated message that the country enjoys sufficient forex reserves and market stability will prevail in the long run.
Describing the Iranian currency market as one of the most "complex" markets, Seif drew a comparison to crisis-like conditions in 2012-13 when rial lost 75% of its value, saying that unlike those days, the inflation is no longer in the double digits.
Latest CBI figures put the country's inflation during 12 months to March 20 at 9.6%.
In the spring of 2016, Iran’s inflation rate eased into single digits for the first time in a quarter century following the lifting of sanctions against Tehran after the implementation of the landmark nuclear agreement, known as the Joint Comprehensive Plan of Action, in January of that year.
"This monetary stability will continue in 2018-19 that has been dedicated to supporting Iranian products. Therefore, the purchasing power of the public will be preserved, but producers can also continue their valuable output with minimum change to their cost," Seif said in his statement.
In a speech aired minutes after the turn of the year on March 21, Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei called on the nation to dedicate their efforts to promoting domestic production.
Ayatollah Khamenei proclaimed this year’s motto as "supporting Iranian production”.
The markets were closed on Monday but it was unclear how the start of trading on Tuesday would fare for foreign exchange rates and the gold coin that had also surged to an all-time high of 17 million rials ($333).
Last week, however, some MPs called on the government to step in to calm the market.
In an interview with the parliament's news website ICANA, Mohammad Reza Pour-Ebrahimi, chairman of Majlis Economic Commission, took the opportunity to reprimand the central bank for its last year's rescue package that he said lacked "expertise".
He said not only those measures were ineffective in addressing the foreign exchange market woes, but also harmed the monetary and capital markets.
According to the lawmakers, during the final months of the previous year, more than $30 billion have been transferred out of the country while $20 billion are being kept outside the banking system.
Pour-Ebrahimi urged CBI to reactivate foreign exchange deposit accounts by banks to encourage the public to deposit their hard currencies in banks.
He said the measure would be part of an upcoming bill to stabilize the currency market and will be introduced by lawmakers if CBI fails to stabilize the situation.
Although no major print newspaper is issued during the Norouz holidays, Donya-e-Eqtesad, the country's main economic newspaper, released an analysis on social media, tracing the volatility to speculative trade in the absence of CBI's interventions following the rise in demand for travel purposes.
The newspaper also linked the fluctuations to uncertainties surrounding the Iran nuclear deal with the appointment of John Bolton as the US national security advisor.
Bolton, a noted hardliner, has in the past argued for attacking Iran and North Korea. He is set to officially replace H.R. McMaster as national security adviser on April 9.