EghtesadOnline: Foreign exchange rates in Tehran's unofficial market declined in a sign that the bull run has slowed, following the Central Bank of Iran's announcement that it will soon unveil a package of new measures.
According to reports from the unofficial market on Tuesday, the rial lay low under the mighty bubble of 110,000 to the dollar, up from 112,000 rials on Sunday.
Iran’s currency had hit a record low on Sunday, dropping past 100,000 rials to the US dollar, as Aug. 6 approaches when Washington is due to reimpose a first batch of economic sanctions on Iran.
In the gold coin market, which has turned into a safe haven for investors, the gold coin declined in value with the benchmark Bahar Azadi fetching 39 million rials ($886 at the official exchange rate ) and below the fresh psychological threshold of 40 million rials, Financial Tribune reported.
CBI is expected to change the foreign exchange policy pursued by the government in the nearly four months since the unification of the US dollar's exchange rate at 42,000 rials.
On Tuesday, the rial also gained against other major currencies. According to Tehran Gold and Jewelry Union's website, the Iranian currency gained against euro by more than 15% and traded at 117,450 for each euro.
In a statement published by CBI on Monday, the bank said it would soon launch the new measures "in the coming days".
Deputy Majlis Speaker Masoud Pezeshkian said on Tuesday the forex package would be unveiled next week, IBENA reported.
During his inauguration this week, CBI Governor Abdolnasser Hemmati said that he has devised a plan to control the forex market and discussed it with President Hassan Rouhani.
Unlike his predecessor Valiollah Seif, who mostly ascribed the currency market volatility to non-economic factors like political influences, Hemmati said the current conditions are byproducts of deeper problems such as "imbalance in banks' balance sheets" and "unwise decisions for using monetary tools".
Not much is known about Hemmati's plans for calming the forex market. However, expanding the secondary market and restricting the allocation of cheap currency to the import of essential goods seem to be at the center of those efforts.
Changes in the Making
Also on Monday, First Vice President Es'haq Jahangiri and Majlis Speaker Ali Larijani both heralded changes in the forex policy.
Larijani criticized the government's currency policy and said the government should have opted for a "floating and guided" single currency rate.
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 the trading of the US dollar at any rate other than the official rate.
However, after a deluge of demand for imports at the attractive unified rate, the government had to allow limited free forex trade through a secondary market at "negotiated rates" between exporters and importers of similar small-scale goods.
The secondary foreign exchange market, which began work earlier this month, also failed to calm the market in an effective way since, according to analysts, it lacked enough depth and scope.
Fars News Agency quoted an unknown official on Monday that the plan to expand the secondary forex market had been sent to President Rouhani and awaits his approval.
The rial has lost about half of its value since April because of a weak economy, financial difficulties at local banks and heavy demand for dollars among Iranians who fear the effects of sanctions.
In its Monday's statement, the central bank blamed “enemies” and their conspiracy to undermine the currency and trigger a rapid rise in gold coin price.
Judiciary Spokesman Gholamhossein Mohseni Ejei said on Monday that “29 people have been arrested for economic disruption and will be soon put on trial ... More may be arrested tonight and tomorrow.”
He added that many of them face the charge of "spreading corruption on earth", which offence can carry the death penalty.
On Aug. 7, Washington will reimpose sanctions on Iran’s purchase of US dollars, its trade in gold and precious metals and dealings with metals, coal and industrial-related software.
Sanctions will also be reapplied to US imports of Iranian carpets, caviar and dried fruits, and on related financial transactions.