EghtesadOnline: The US dollar dropped by 21,000 rials on Sunday, losing close to 9% against the rial. The decline soon extended to bullion market, causing gold prices to fall about 10%.
The greenback was traded at 215,000 rials at Tehran’s free market on Sunday, down from 236,000 rials quoted by moneychangers a session earlier on Thursday. The euro fetched 253,100 rials, down from 280,000 rials a session earlier.
The falling forex rates are possibly due to “declining expectations” in the market following statements by the Governor of the Central Bank of Iran Abdolnasser Hemmati on Friday evening.
Speaking on state TV, Hemmati again insisted that currency rates are “far from reality”, reassuring the public that “the CBI has adopted measures that would bear fruit in the coming days”.
Dismissing allegations that the CBI intentionally lets currency rates soar to generate much-needed funds for budget deficits, he said decline in currency rates in the “very near future” would dispel such rumors.
His remarks in tandem with other positive statements by top government officials in the past week were enough to affect sentiments in the market and boost expectations that forex rates will fall.
President Hassan Rouhani last week promised some “economic relief” to address rising concerns of the majority of Iranians.
This was followed by similar statements by his chief of staff, Mahmoud Vaezi, who said “we are in the final days of sanctions”. He was referring to the tough US sanctions that have targeted Iran’s key economic sectors.
Rouhani’s promised relief led to speculations among the public over what may unfold in coming days. No matter the relief, the news was enough to have an impact on the chaotic and permanently rising currency market.
Exchange bureaus affiliated to the CBI pulled down prices by 5.5% on Sunday to make rates at bank-based moneychangers get closer to free market’s rates.
Rising demand and sinking supply in the secondary currency market, known as Nima, have been blamed for the forex volatility that sent the dollar as high as 260,000 rials in July. Nima is the main currency platform through which exporters sell their overseas earnings and importers buy.
Market observers say demand for foreign currency has shot up because importers approach the unofficial market to buy forex in the absence of the supply crunch in Nima.
Hemmati said the supply side has been strengthened in recent days as more exporters were offering their export proceeds at Nima. The senior banker added that $2.5 billion in export earnings were offered on the market in 10 days after the export revenue repatriation deadline expired on July 21.
Gold prices plunged on Sunday following trends in the currency market. Emami gold coin lost more than 7.5%, or 8 million rials, and closed the session at 106.8 million rials. One Bahar Azadi gold coin was sold for 105 million rials to drop 6%. One gram of 18-karat gold fell 9% to 10.36 million rials, according to the Tehran Gold and Jewelry Union.
Gold’s record-breaking rally paused on Friday as the dollar got some respite from global investors looking for a hedge against the US-China spat, but fears over a worsening pandemic kept bullion on track for its longest streak of weekly gains in about a decade, Reuters reported.
Spot gold was 0.6% lower at $2,051.52 per ounce, having hit another record high of $2,072.50 in early trade. It has added about 4% last week for what would be its ninth straight weekly gain.