EghtesadOnline: The secondary foreign exchange market started working in earnest on Tuesday, with reports suggesting that the first trading at a negotiated exchange rate was almost equivalent to that of the open market rate.
Mohammad Mehdi Raeiszadeh, a banking advisor to Iran Chamber of Commerce, Industries, Mines and Agriculture, said exporters and importers agreed on an exchange rate close to 80,000 rials for hard currency earnings of some non-oil exports, IBENA reported.
The news marks a victory for campaigners seeking a free market approach in the secondary market, which initially faced the threat of government rate controls.
On the same day, the rial was reportedly being traded at around 79,000 rials against the dollar, finally breaking below the support level of 80,000 rials, Financial Tribune reported.
Earlier, in the midst of a strong rally, the USD exchange rate had reached the all-time high of 90,000 rials.
The gold coin, which has also tagged along the forex bull run, cooled down, with the benchmark Bahar Azadi Gold coin fetching 27.82 ($662 at the official exchange rate), marking a 2.44% decline from the previous day.
Rial also gained against other major currencies on Tuesday.
"The launch of the secondary forex market has given a positive signal to the forex market and caused a relative stability to set in," Raeiszadeh said.
The advisor noted that the forex supply for the services sector has not yet entered the secondary market and the government has not yet devised a strategy for extending up to €1,000 to outbound tourists at the unified rate of 42,000 rials.
The government decided to unify the US dollar's exchange rate at 42,000 rials on April 9 in response to volatility that saw the rial sink to all-time lows against the greenback.
At the time, it also banned the physical trade of hard currency by exchange shops and at any rate other than the official rate.
Including More Goods
The acceptance of forex trade at open market rates, however, came after the government saw itself unable to meet a tsunami of demand for imports at the subsidized rate that became all the more alluring when the gap between the official and black market rates widened.
Mehdi Kasraeipour, the head of CBI's Foreign Exchange Policies & Regulations Department, confirmed on Monday that only 20% of exporters have been allowed by the government to offer their currency earnings or their license at negotiated rates at Samasa to an importer or to put it up for sale at Nima.
Nima is the local name for the Integrated Forex Deals System the government launched after it unified the USD forex rate in April and Samasa refers to the System for the Management of Export Currency Earnings.
Some senior lawmakers asked President Hassan Rouhani this week to significantly limit the multi-tier foreign exchange system, based on which a big portion of imported goods receive their hard currency at the preferential rate of 42,000 rials by including more products into the "negotiated rate" system.
Mohammad Reza Pour-Ebrahimi, the head of Majlis Economic Commission, told Fars News Agency on Tuesday the government's decision to unify the foreign exchange rate at 42,000 rials was wrong from "day one".
"In conditions where the market rate is higher than the official rate, the hard currency, which should be used for the import of essential goods and medicine, is being used to import mobile handsets, luxury goods, cars and pet food," he said.
The unified rate has been criticized for creating a fertile ground for rent seeking whereby a select few get access to cheap currency.
At the behest of President Rouhani and public pressure, the CBI published the list of car importers that had received the cheap currency.
The list followed an earlier disclosure by ICT Minister Mohammad Javad Azari-Jahromi, which involved the names of cellphone importers who had benefited from cheap currency but did not honor their commitment to offer their goods at the same rate to consumers.
Tehran Police Chief Brigadier General Hossein Rahimi also announced this month that cellphone importers, who enjoyed access to cheap dollar, had sold 300,000 handsets at open market rates.