Iran Foreign Exchange and Gold Market Volatility Subsides
EghtesadOnline: Rial rebounded on Sunday, in anticipation of Central Bank of Iran Governor Abdolnasser Hemmati's announcement of the new plan to calm forex market volatility that has seen Iranian currency sink to a series of record lows.
According to reports from the unofficial market, the dollar was trading at about 99,000 rials in the afternoon, from around 102,000 rials the day before. It also marks the rial's strengthening below 100,000 per US dollar since it crossed that resistance level last Sunday.
Local news media reported that Hemmati is to brief the public on the much-touted plan late Sunday in a prime -time news program.
Earlier, First Vice President Es'haq Jahangiri had said Hemmati would unveil the plan on Monday, Financial Tribune reported.
The bearish market was also extended to the gold coin market where prices have jumped to historic highs. The benchmark Bahar Azadi gold coin lost nearly 2.5% on Sunday and was traded for 36.20 million rials ($822 at the official exchange rate).
Not much is known about the new forex measures, but it is widely expected to contain measures that will give a boost to the secondary market.
The rial has lost half its value against the dollar in just four months, having broken through the 50,000-mark for the first time in March. It then hit a record low last Sunday of 100,000 rials to the dollar, one day after Hemmati took the helm of the Central Bank of Iran.
The government attempted to fix the rate at 42,000 in April and said it would crack down on speculators.
The currency collapse intensified after the US announcement in May that it was pulling out of the 2015 nuclear deal that lifted certain sanctions in exchange for curbs on Iran’s nuclear program.
The US is set to reimpose its full range of sanctions in two stages on August 6 and November 4, forcing many foreign firms to cut off business with Iran.
No Forex for Overseas Travelers
The new currency plan is also expected to stop the allocation of travel currency to outbound tourists at the official rate, which move has been criticized by many as profligate.
Tasnim News Agency quoted parliamentary speaker, Ali Larijani, that the government's currency plan will end the allocation of cheap foreign currency, except for the import of essential commodities.
At present, the government allocates €500 and €1,000 to people travelling to neighboring and distant countries respectively. This amount is only allocated to each person once a year.
Nevertheless, some news outlets reported that agent banks have already stopped paying out travel currency.
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 US dollar at any rate other than the official rate.
Criticism about the government's forex controls came to a head when reports of widespread abuse and rent-seeking were disclosed by the lucky few who had access to the cheap currency.
It also caused demand for import currencies to surge, leading to a subsequent decline in exports.
Chairman of Majlis Economic Commission said on Saturday that the parliament has set 12 conditions for the government's new forex plan and will only support the measures if these conditions are met.
Mohammad Reza Pour-Ebrahimi said the government's plan should be able to provide hard currency both for meeting essential needs and the everyday use of people.
Among parliament's conditions are the distinction between primary and secondary markets, the provision of travel currency from the secondary market, offering petrochemical and steel export revenues in the secondary market, giving official status to currency exchange houses and limiting central bank interventions in the open market operations.