EghtesadOnline: Currencies took a drubbing in Tehran after rallying for seven consecutive days and the decline soon extended to gold prices.
The rial pared earlier losses on Monday as the dollar lost more than 8%, dropping 21,000 rials from 248,000 rials at the end of Sunday’s session to 227,000 rials on Monday.
One euro bought 263,000 rials, down 21,000 rials, and the UAE dirham changed hands for 66,800 rials.
Foreign currency was of the descending order late on Sunday and picked up pace Monday after the Governor of Central Bank of Iran Abdolnasser Hemmati tried to assure the anxious nation that “stability would return to the market”.
On his social media account on Sunday evening, Hemmati wrote the CBI has measures underway to restore stability to the chaotic forex market. He was addressing mounting criticism that the CBI had remained indifferent to the unprecedented depreciation of the rial.
“The perception that the central bank and the government do nothing to control the currency market is baseless and misplaced,” he wrote.
Hemmati dismissed widespread allegations that the government was jacking up currency prices to finance its unending budget deficits.
As expected, the senior banker ascribed the recent turmoil in currency market to the “unusual piling up of demand” and “exporters’ hesitation” to repatriate their forex earnings.
He also pointed to unnamed avaricious currency dealers in the unofficial market who sell the much-needed forex to importers at unusual prices. It was not clarified from where the middlemen get the foreign currency.
High demand and plunging supply in the secondary forex market, known as Nima, is also blamed for the volatility that has seen currency prices jump to historic levels. Nima is the main currency platform through which exporters sell their overseas earnings and importers buy.
Market observers have said in recent months that demand for foreign currency has shot up because importers in increasing numbers are approaching the unofficial market to secure forex in the absence of supplies from Nima.
There are reports that some exporters, who failed to return their currency earnings on time, also try to buy forex in the free market to fulfill their currency repatriation commitments and escape penalties announced by the CBI.
The CBI last month warned defaulting exporters to repatriate their two-year currency latest by today (July 21) or face legal consequences.
Hemmati asked importers to “be patient for a few more days and meet their needs via Nima in coming days”. To what extent his assurances convinced the forex-starved manufacturers reliant on foreign raw material and machinery was unclear.
Likewise, exporters were again told to offer their currency “at reasonable rate to be able to find buyers”.
Monday’s decline in currency rates can be linked also to increase in supply in the secondary market. The CBI said on its website on Monday that $300 million was offered via Nima in the past two days at the average rate of $1=183,000 rials.
Gold Follows Suit
Following the decline, gold prices plunged on Monday despite the fact that the precious metal again rose in international markets.
Emami gold coin lost more than 5%, or 5.4 million rials, and closed the session at 106.8 million rials. Bahar Azadi gold coin was sold at 99 million rials to drop 9% daily. One gram of 18-karat gold fell 6.4% to 9.95 million rials, according to the Tehran Gold and Jewelry Union.
in world markets, gold inched up on Monday as escalating numbers of coronavirus cases raised concerns over the pace of economic recovery and fueled expectations of more stimulus measures, Reuters reported.
Spot gold was up 0.1% at $1,810.79 per ounce and US gold futures were 0.1% higher at $1,812.30.