EghtesadOnline: Foreign exchange rates plunged in Iran’s currency market on Thursday amid nervousness over the fate of the US presidential election.
Panic-selling was reported as initial results of the presidential election showed Joe Biden was drawing closer to victory, sending the US dollar to as low as 263,000 rials in the early hours of trade in Tehran’s open market.
The greenback recovered slightly later and closed at 272,000 rials, down 23,000 rials or 9% compared to the earlier session.
The euro lost 9% or 28, 000 rial to reach 319,000 rials and the UK pound sterling closed at 353,000 rials, 9.2% lower compared to prices quoted the day before. The UAE dirham was down 6% losing more than 4,000 rials to be worth at 75,100 rials.
The Persian economic website eghtesadnews reported that official exchange bureaus affiliated to the Central Bank of Iran refused to buy currency on Thursday, quoting only selling prices.
Melli Exchange, affiliated to the Bank Melli Iran, tagged the dollar selling rate at 263,500, down 27,000 rials compared to Wednesday.
Despite Friday being the weekend holiday, the news website said that the dollar was traded much lower in the unofficial market as Biden’s chance for winning the chaotic voting increased. Media outlets reported that the American currency fell below 260,000 rials during Friday.
Bet on Election
Currency sell-off came as market speculators dreaded that change of guard in the White House might strengthen the national currency that has been in freefall since early this year.
Investors say four more years of the divisive and highly controversial Trump means more economic pressure on Iran and by extension on the tanking rial. A few months after taking office, in May 2018, Trump walked away from the nuclear deal Iran has signed in 2015 with the six world powers.
Soon after he announced his infamous “maximum pressure” policy and imposed the toughest ever sanctions against most major industries along with economic and political figures.
The sanctions took a heavy toll on Iran’s foreign currency revenue and devalued the rial as never before. When Trump came to the White House the dollar sold for 37,000 rials and weeks before his anticipated ouster it was 322,000 rials.
The forex panic selling was combined with CBI intervention in the forex market last week. In a notice published on its website, the bank said that it had sold average $65 million on daily basis to exchange bureaus operating at the regulated forex market during the last Iranian week.
The CBI said moneychangers bought only $11 million of the offered currency, which shows that “there is no significant demand for foreign currencies in the market”.
The regulated market is a network of banks and certified moneychangers working under CBI supervision and dealing in wholesale trade.
Gold in Tailspin
Gold prices also declined sharply on Thursday. The Emami gold coin fell by 18 million rials to be worth 131 million rials, posting about 13% decline overnight.
Half Bahar Azadi coin lost 11% to reach 72 million rials and one gram of 18-karat gold was quoted at 12.22 million rials.
Gold fell on Friday in international markets, as the dollar gained, but was set for its best week since late July on hopes for more central bank economic support as investors bet on a divided US Congress under a Biden presidency, Reuters reported.
Spot gold fell 0.5% to $1,939.10 per ounce. Prices soared 2.4% on Thursday on the dollar slide, setting them up for a 3.2% weekly gain. US gold futures dropped 0.3% to $1,940.20 per ounce. The dollar rose 0.2%, making gold less attractive to other currency holders.