New CBI Measures to Help Forex Stability
EghtesadOnline: Bank-affiliated exchange bureaux are required to cut the cost on money transfers in order to facilitate currency deals in banknote and hawala, the Central Bank of Iran reported on its website.
The plan was announced Thursday during a meeting held by CBI to coordinate the activities of bank-affiliated exchange bureaux with the regulator to curb forex rate volatility.
The meeting was attended by Gholamreza Panahi, the CBI deputy for forex affairs, directors of bank-affiliated exchange shops and other authorities pertaining to foreign exchange affairs in the CBI.
Regarding the need for a stable forex market, Panahi called for a bigger role for bank-based exchange shops in managing and regulating the forex market in the new fiscal (started March 21), Financial Tribune reported.
Governor of the Central Bank of Iran Abdolnasser Hemmati earlier in the week reiterated the need for a stable forex market as a prerequisite for businesses to plan their future course of action in a calm economic environment.
Major currency rates in the open market rallied last week after relative stability during the Persian New Year holiday. The US dollar climbed above the resistance level of 140,000 rials on Monday for the first time in the current calendar year.
Later in the week, the CBI managed to put the brakes on forex rates taking regulatory measures that mainly involved bank-affiliated exchange offices.
Bank-affiliated exchange offices at times have played a regulatory role of the CBI after steep forex rate fluctuations since last summer that sent the rial to unprecedented lows. They actively participate in the forex market by injecting currency into the market at lower rates when demand is high and buy the surplus at rates set by the CBI to control the market.
Role of AED
Market analysts ascribe last week’s surge in forex rates to higher rates for transferring the UAE dirham via hawala.
Hawala is a method of transferring money based not on the movement of cash, or on telegraph or computer network wire transfers between people, but on the performance and honor of a huge network of money brokers.
Unlike the conventional method of transferring money across borders through bank wire transfers, money transfer in hawala is arranged through a network of “hawaladars” or hawala dealers.
Mehr news agency reported Wednesday about the latest CBI decision to control the rate of dirham hawala by changing dirham transaction procedures. Accordingly, the CBI instructed exchange shops to sell dirhams and receive the equivalent in rials.
The measure is expected to help the CBI boost its dirham reserves while reducing its impact on other major currencies.
According to the Persian-language newspaper Donyay-e-Eqtesad, citing analysts close to the CBI, the regulator is trying to curb the influence of the UAE currency (AED) on Iran’s market by promoting trade with Iraq.
In another development, the regulator extended the working hours of bank-affiliated exchange offices to provide for the currency needs of the people. In a CBI notice published on its website Wednesday, the exchange offices will remain open till 6:00 pm instead of 4:00 pm.
It seems that the measure was taken to mitigate the negative influence of dealers’ activities in the black market after the closing of exchange shops in the afternoon.