EghtesadOnline: The Central Bank of Iran on Wednesday temporarily suspended allocation of $2,200 or equivalent in foreign currency at relatively less rates to the people after price arbitrage with the free market caused new problems.
To calm the chaotic currency market, in the summer of 2018 the CBI imposed restrictions on the sale of currency to the people, mostly those travelling overseas, to fight speculative activities, IRNA reported.
As per law, Iranians were able to buy not more than $2,200 (or equivalent) in one year from authorized moneychangers by showing their ID cards.
The price arbitrage between bank-based moneychangers and the free market went as high as 30,000 rials in recent days, tempting people to buy their so-called yearly “currency quota”, sell it in the unofficial market and pocket 40 million rials!
The new restrictions are apparently to control “unreal demand” for currency and moneychangers will continue selling cheap currency to those who need forex for travel, medical and educational proposes, according to Jamal Amin, managing director of Melli Exchange Company.
In a talk with Fars News Agency, Amin said buyers who are in real need for currency have to provide “proper documents”.
In recent days long lines of people were seen in front of bank-based exchangers to buy the “quota currency” and sell it to make a quick buck.
Forex Rates Jump
Foreign exchange and gold markets in Iran experienced another bout of rallies this week. Extending a bull run that gained momentum from Monday, the dollar reached 257,000 rials on Wednesday in Tehran’s open market. The greenback was up 1.5% compared with a session earlier.
The CBI, which is the main market influencer, has for years, more intensely in the past few months, tried but failed to assure the nation that it is in “full control of the [forex] market and would intervene” if and when necessary.
“The central bank is present in the market for the past two years to fight speculative activity,” CBI Governor Abdolnasser Hemmati said in note posted on his social media account late on Wednesday.
“The CBI’s presence in the market has controlled volatility and tried to stabilize the market. We will strongly move forward with this policy,” he added.
Hemmati said forex rates, as a macroeconomic variable, is the function of and influenced by other markets. He was referring to ongoing chaos in the stock market plus the historic rise in auto and housing market in recent weeks.
Share prices in Iran’s stock market have declined almost by half in two months, causing nervous investors to rush to the exits and approach other safe havens, namely the currency market.
Hemmati said the central bank is ready to help the government stabilize financial markets. “The bank, however, will make sure that [supportive] measures don’t harm the CBI’s balance sheet and impact monetary base”.
Gold at New Highs
In the domestic gold market, Emami gold coin reached new highs on Wednesday and sold for 118.6 million rials, up 1.5 million rials, or 1.2%, compared to previous day.
The benchmark Bahar Azadi climbed 1.4% to 112.5 million rials. One gram of 18-karat gold sold for 11.43million rials, up 2% overnight.
In global markets, gold eased on Wednesday on a firm dollar and as some investors sold bullion to offset losses from a recent selloff in equities, but worries about a delay in the development of a coronavirus vaccine limited the metal’s declines.
Spot gold fell 0.5% to $1,922.21 per ounce and US gold futures fell 0.7% to $1,928.90, Reuters reported.