EghtesadOnline: The foreign exchange market in Iran is experiencing unprecedented highs as major currencies continue to rise against the national currency.
In the open market the dollar was quoted at 312,000 rials on Sunday -- up 4,500 rials or 1.5% compared to Saturday’s close. It had climbed above 300,000 rials last Thursday after struggling to break past the strong resistance level for two weeks.
The euro and pound sterling remained unchanged at 363,490 rials and 401,470 rials, respectively. The most significant hike Sunday was for the UAE dirham with 1.51% daily growth closing at 85,800 rials.
Given the importance of the Emirati currency in Iran’s trade and currency market, spike in dirham rates is seen as one of the driving forces behind the higher dollar. Due to its traditionally strong ties with Iranian merchants, Dubai is a hub for Iran’s foreign exchange transactions.
The non-stop tanking of the rial again compelled the beleaguered Central Bank of Iran to intervene. In a press release on Sunday, the CBI said it will inject $50 million in hard currency in the forex market every day to try and stabilize rates.
Currency infusion is done via CBI-affiliated exchange shops. Moneychangers bought the dollar at 300,000 rials and sold it for 311,540 rials.
The selling rate indicated 4% increase or 12,000 rials compared to the earlier session. Offering higher rates to buyers is apparently aimed at reducing the arbitrage with open market rates.
It also is an attempt to discourage buyers hunting for relatively cheaper currency offered by CBI moneychangers and selling it in the open market for a fat profit as has become a habit in the past several months.
Melli Exchange, affiliated to the state-owned Bank Melli Iran, quoted the euro at 367,960 rials, up 4.8% or 16,890 rials, compared to the session earlier.
Another CBI Move
As part of other measures to ease the turmoil in the market, the CBI said Sunday it had raised the ceiling for purchasing currency by exchange shops and banks operating in the regulated market.
“To balance the market, the CBI will increase the cap for buying currency up to $500,000 a day,” the CBI said.
Regulated market refers to a network of banks and certified moneychangers working under CBI supervision. The market was never unveiled officially but officials say it has started pilot operation.
Traders in the regulated market will deal in wholesale trade while retail business is said to be the function of moneychangers outside the regulated forex market.
As confusion intensified in the currency market, rumors emerged on social media about the resignation of the central bank governor Abdolnasser Hemmati only to be denied by IRIB, the state broadcaster.
Market observers partially ascribe the currency volatility to fresh sanctions announced by the US Thursday against Iran’s financial sector.
Donald Trump’s Treasury Department on Thursday imposed sanctions on 18 Iranian banks aiming to totally cut off the country from the world's financial system and harm the government’s shrinking revenues.