EghtesadOnline: Foreign exchange and gold prices were sluggish in the preceding Iranian week and like other markets stepped back due to the new round of lockdown to curb the spread of the coronavirus.
The US dollar fetched 247,000 rials on Thursday, posting 1.7% decline daily and more than 5% lower compared to prices quoted the same day last week. The euro retreated to 294,000 rials down almost 1% daily. UK’s pound sterling was quoted at 330,000 rials while the UAE dirham fell 1.5% to trade at 68,500 rials.
Since early this month the dollar has lost more than 13% apparently due to the outcome of the highly contested US presidential elections. It started to lose value after a wave of panic selling broke out in Iran's chaotic currency market after it became almost certain that the Democratic challenger Joe Biden was the victor and the underdog Donald Trump had lost his job.
Market speculators dreaded that change of government in the United States could salvage the national currency that has been in freefall since early this year.
Spike at Secondary Market
In a rare development, forex rates in the secondary market, known locally as Nima crossed above open market rates last week.
Nima, or the Integrated Forex Deals System, is a platform where exporters sell currency earnings to companies importing goods. Currency in this market is traded in the form of forex hawala.
Though Nima rates are normally below open market rates, it has grown steadily in recent weeks. In the hawala system the dollar was worth 257,000 rials or 10,000 rials higher than the open market rates.
While the Central Bank of Iran closely monitors forex trade in the open market, observers say it has quietly let Nima rates rise to encourage exporters bring to repatriate their overseas revenue to a market forever struggling with a supply crunch.
Exporters have complained about rules imposed by the central bank demanding they sell their overseas earnings at rates below the open market.
Currency repatriation has become a cause celebre for exporters and the CBI for months with exporters complaining that the rules are harsh, restrictive and impractical and the CBI insisting that rules must be respected.
Gold’s Downward Spiral
Gold prices plunged further and at higher speed as the two main drivers, namely forex rates and global markets, were sluggish.
Receding steadily from a record-high of 163 million rials in mid-October, the Emami gold coin has plunged below 110 million rials. It was worth 108 million rials on Thursday or 9% decline in one week.
Half Bahar Azadi coin lost 1.8% to reach 57 million rials and one gram of 18-karat gold was quoted at 10.46 million rials.
Downturn in the forex and gold markets gathered momentum soon after the government in Tehran announced a new round of lockdown to curb the deadly Covid-19 plague in cities hit hard by the virus as infections and deaths mount.
Starting last Saturday the government is implementing stricter controls on less-needed businesses, including the closure of the gold market and moneychangers operating at half capacity.
In international markets, gold edged down on Friday, on path for its worst weekly decline in two months, as hopes for a virus vaccine and a rebound in economic growth dulled demand for the safe-haven asset.
Spot gold fell 0.1% to $1,808.30 per ounce by 1054 GMT, down 3.4% on the week so far, it's biggest weekly loss since Sept. 25. US gold futures were little changed at $1,806.40.