At 260,000 Rials, US Dollar Surpasses All-Time High
EghtesadOnline: Building on earlier gains, the US dollar advanced at the start of the trading week on Saturday climbing above the psychological level of 260,000 rials in unofficial currency markets in Iran.
This is the highest ever rate registered for the greenback, seen also as a strong resistance level. It had briefly reached 259,000 rials on July 18.
The dollar closed at 262,000 rials in Tehran’s open market, up 5,000 rials, or 2%, compared to the previous on Thursday. The currency has gained 8%, or 20,000 rials, since the beginning of the last trading week.
One euro was worth 312,000 rials, up 9,000 rials compared to Thursday and the UK pound sterling soared to 336,900 rials.
After resisting price pressures for two weeks, exchange bureaus affiliated to the central bank raised the dollar rate by 3,620 rials, or 1.6%, to 231,520 rials for the day, to lessen the price arbitrage with free market rates.
Last week, price arbitrage between prices quoted in the open market and licensed exchange offices tempted buyers to line up in front of bank-based moneychangers for the relatively cheaper currency.
Forex rates in the secondary market, known as Nima, saw a similar trend on Saturday with selling rates increasing to draw closer to buying prices. Difference between selling and buying prices had reached 10,000 rials in recent days.
Nima is the main currency platform were exporters sell their overseas earnings and importers buy.
The USD selling price at Nima increased by 0.6% to reach 210,000 rials. Buying rates dropped by 1.1% to 210,618 rials, according to Tehran Gold and Jewelry Union website.
Governor of the Central Bank of Iran Abdolnasser Hemmati has often said that currency rates quoted in the open market are “not real”. In his opinion Nima rates give a better reflection of the value of foreign currencies against the rial because this platform handles most of the currency used for foreign trade.
Nima rates have increased by 53% since the beginning of the fiscal year in March as export became difficult due to the coronavirus pandemic and disrupted the repatriation of export earnings.
However, observers and officials note that even before Covid-19 hit half a year ago many exporters were reluctant to bring back their earnings home as the law demands.
Eyeing trends in parallel markets, analysts refer to “rising expectations” among investors as one potential factor behind the unprecedented upsurge in currency rates.
The upside is partly attributed to a relatively deep downturn in the stock market and speculations that a prolonged bear market may push more investors to buy foreign currency as a hedge.
In the domestic gold market, the Emami gold coin strengthened above the critical 120 million rials reached a session earlier.
Each Emami coin was worth 122.66 million rials on Saturday, up 2.3, or 2.75 million rials compared to Thursday.
The benchmark Bahar Azadi climbed 3.1% to 116.14 million rials. One gram of 18-karat gold sold for 11.70 million rials, up 1.4%, according to TGJU.
Reacting to the upsurge in the gold market, Ebrahim Mohammad Vali, head of TGJU, said currency and gold prices in global markets and domestic demand are the three main drivers of the domestic bullion market.
Spike in the precious metal is primarily attributed to forex rates rising in tandem with demand for gold in global markets, IRNA quoted him as saying.
“Due to the negative climate in other financial markets, like stocks, investors apparently have come to the conclusion that putting money in gold is safer. This has given further rise to demand”.
In international markets gold slipped on Friday on a lack of further stimulus from the European Central Bank and the US government. But for the week the safe-haven metal was set to end higher on concerns over an economic recovery, Reuters reported.
Spot gold fell 0.7% to $1,941.07 per ounce; prices were up 0.4% so far this week. US gold futures settled down 0.8% to $1,947.90.