Currency, Gold Post Weekly Decline in Iran
EghtesadOnline: Currency and gold markets in Iran registered one of their biggest weekly declines in recent months despite the re-sanctioning of wide sectors of the economy by the Trump White House.
On Thursday, which marks the last trading day of the week for gold and currency markets, the US dollar was traded for 127,000 rials, down from 144,000 rials on Saturday. Similarly the euro, which was traded for 164,000 rials on Saturday, also lost ground against the rial and sold for 147,000.
State TV, however, reported on Thursday that the US dollar was at or below 120,000 rials. The currency market has seen wild gyration in the past six months with the rial losing approximately 70% of its value. Some analysts say since the impact of the sanctions baked in during the volatile days, it heralds a relatively more stable period for the national currency in the coming months.
In a tweet on Thursday, Mohammad Lahouti, president of Export Federation of Iran and a senior business official said now that the foreign exchange market is moving toward "logical" rates, the government should proceed to bring the" secondary market rate" closer to the free market rate and do away with the highly controversial multiple rates, according to Financial Tribune.
The secondary market was formed by the Central Bank of Iran in August after the bank said a certain class of goods would no more be eligible for subsidized currency and the rates of foreign currency they need should be negotiated between them and exporters who sell their earnings inside the country.
A myriad of directives aimed desperately at controlling capital outflow has shocked the business community and manufacturers. They complain that government intervention in the secondary market has again kept its rates artificially low.
Persian-language newspapers reported on Thursday that CBI currency injections in the market was the key factor behind the declining currency rates. A scarcity of rial for pulling off big deals and the presence of security forces ready to crack down on illegal currency deals are also said to be factors behind the downward spiral.
The so-called “sultan of coins” and his accomplice were executed on Wednesday in Tehran for ostensibly hoarding gold coins and manipulating the gold market for personal gain.
Vahid Mazloumin and Mohammad Ismail Ghasemi were found guilty of Mofsed fel-Arz (corrupt on earth). They were convicted of manipulating the coin and hard currency markets through illegal and unauthorized deals as well as smuggling. The judiciary has announced that more arrests have been made in recent weeks with dozens of "economic disruptors" being nabbed.
Gold coin prices also dropped in Tehran market with the benchmark Bahar Azadi gold coin fetching 38.5 million rials. The coin changed hands at 43.5 million rials five days earlier.
Mohammad Keshtiaray, head of the specialized gold and jewelry commission told state TV that gold prices were down 20% during the week to November 15 and expected the bear market to continue in the coming week.
Some market players however, say the current market trends are not sustainable and believe that the sanction prospect and the toll it is likely to take on the economy would lead to higher forex rates in the medium and long term.
The administration of US President Donald Trump launched the second wave of sanctions against Iran from November 5 in which a ban on oil exports is a primary objective.
US officials claim that the tough restrictions are meant to bring down Iran’s oil exports to zero. However, officials in Tehran have dismissed the possibility of that happening on the grounds that the crude market would not be able to sustain a complete ban on Iranian supplies.
In its latest report on World Economic Outlook, the International Monetary Fund prospects for 2018–19 were marked down sharply for Iran, reflecting the impact of the new US restrictions.
The downward revisions, to a great extent, reflect the worsening growth prospects for Iran under the new and challenging climate. The IMF said Iran’s economy is now forecast to contract (?1.5%) this year and especially (?3.6 %) in 2019 on account of reduced oil production, before returning to modest positive growth in 2020–23.
Intro: Some analysts say since the impact of the sanctions baked in during the volatile days, it heralds a relatively more stable period for the national currency in the coming months