Hemmati Blames US Plots for Steep Increase in Forex Rates

In a note posted on his social media account on Wednesday, Hemmati particularly pointed to the “propaganda” unleashed by the United States to hurt Iran’s currency market. 

“The US government has embarked on its final attempts to turn the currency market upside down in the past several weeks via a propaganda campaign to activate all sanctions [against Iran],” he wrote.

He was referring to a recent US threat to trigger a return of all UN sanctions on Iran using a provision in a 2015 nuclear deal between Iran and world powers, known as snapback, even though the embattled and controversial US president, Donald Trump, abandoned the historic accord in 2018. 

Russia and China have expressed strong opposition, calling for the full implementation of the deal, formally known as the Joint Comprehensive Plan of Action.   

Britain, France and Germany released a joint statement in August saying they would not support the action “which is incompatible” with efforts to preserve the JCPOA, France24 reported.

 “It appears that there nothing left to impose maximum pressure,” Hemmati said, referring to the Trump’s hostile campaign to apply the toughest ever US sanctions against Iran.

The senior banker added that currency dealers, brokers and speculators are trying to make the best use of the US propaganda ploy to jack up prices. 

Major currencies made unprecedented gains against the rial with the dollar reaching an all-time high this week. The greenback was traded around 269,000 rials on Wednesday, up 3,000 compared to the previous session. 

The currency jumped to 273,000 rials on Monday, sounding alarm bells for the regulator to step in and control rates. Following the CBI’s intervention, the dollar retreated to 263,000 rials for the day, but advanced again in the days after.

“As I said earlier, forex rates are not based on economic paradigms,” he noted, again calling on the people, nervous about the systemic loss of their hard-earned savings, not to put their money in the currency market. 

Stability of the currency market is a priority for the central bank, he said, adding that the CBI would inject foreign currency whenever necessary.  

The CBI often intervenes through its authorized exchange shops. Amid the steep forex rate hike on Monday, CBI’s moneychangers pushed up the greenback by a massive 12% to draw rates closer to the open market. Melli Exchange, affiliated to Bank Melli Iran, tagged the dollar at 271,000 rials on Wednesday, 2,000 rials above the prices quoted in the  unofficial market. 

When price differences in the open market and CBI exchanges increase, the regulator tends to first push up rates to bridge the gap, and then controls the market with lower rates. The price gap had reached to unprecedented 40,000 rials on Monday. 

Nima Market 

The CBI governor said the regulator is striving to increase foreign currency access in the secondary forex market, known locally as Nima. 

Nima is a trade platform where exporters sell their proceeds and importers buy to import goods. Shortage of currency in this particular market has often been blamed for the steep rise in currency rates over the past several months. 

In line with efforts to boost the supply side, Hemmati said that exporters of mineral, steel and petrochemical products can henceforth sell their earnings directly to all exchange shops. Previously, they were allowed to sell their proceeds only to the CBI exchange bureaus. 

Rates in Nima are lower than open market but prices in this market, too, have jumped in recent weeks. One dollar was selling for 210,775 rials in the secondary market and bought for 211,645 rials on Wednesday, according to the Tehran Gold and Jewelry Union website.   

Highlight: The CBI boss says forex rates are not based on economic paradigms. He has again called on the people, nervous about the systemic loss of their hard-earned savings, not to put money in the chaotic currency market.