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EghtesadOnline: The Central Bank of Iran is planning to launch a foreign currency bourse in the banking system, probably after the unification of foreign exchange rates by the end of the current Iranian year (March 20, 2017).

Samad Karimi, director of CBI’s office for exportation, announced that CBI will allow bankers to conduct forex futures operations after the implementation of a single foreign exchange rate system, reported on Saturday.

“Forex futures deals would be conducted by banks,” he said.

However, no official announcement has been made yet.  

Futures deals were initially supposed to take place in the stock market, which would have also made secondary deals possible, but currency forwards are basically conducted between two parties at a specific rate and time, hence CBI has stipulated that such deals should be conducted by banks.

Officials in Iran Mercantile Exchange announced earlier that CBI has approved the establishment of a currency futures market, although it had set two prerequisites for the plan.

The unification of foreign exchange rates and establishment of an interbank forex market are prerequisites set by the Central Bank of Iran for launching a foreign currency futures market, according to the head of Iran Mercantile Exchange.

The Central Bank of Iran is planning to unify forex rates by the end of the current Iranian year. In line with the plan, the CBI has officially permitted banks to start trading in the forex open market in line with its declared aim of unifying foreign exchange rates.

The directive allows banks and customers to negotiate the rates. Before the CBI decision, forex trade in the parallel market was dominated by powerful bureaux de change and street money changers.  

The previous administration had planned to launch a forex bourse four years ago when the exchange rates hiked considerably. However, the central bank announced that it would not shoulder any responsibility over exchange rates, if the bourse is established, which put an end to the plan, according to Financial Tribune.

Instead, CBI proposed the establishment of a trade center for selling foreign exchange at a subsidized rate.

Rate Unification

Deputy Economy Minister Hossein Mirshojaian also said that the government is planning to unify exchange rates in winter.  

“However, the process of foreign exchange transactions with the country should first be eased and foreign exchange resources of the country should be increased to make this possible,” he said.

Mirshojaian noted that any move for materializing the plan should be taken cautiously, otherwise it might result in the plans’ failure.

“The unification of foreign exchange rates would affect the rate of inflation, but the exact amount of surge in inflation rate depends on the set forex rates,” he said.

“CBI and the Ministry of Economy have proposed a rate, which is close to the official and market rates at present.”

According to the official, foreign currencies are currently traded 16% higher than subsidized rates in the open market and “the difference is promising”.

Iran was forced to revert to the controversial double exchange rate regime after nuclear-related sanctions caused turmoil in the forex market in 2011-12, during which the national currency lost almost 70% of its value within days.

CBI Central Bank of Iran Forex Bourse Samad Karimi