Fresh Rally in Tehran's Forex, Gold Markets

EghtesadOnline: Foreign exchange witnessed a fresh rally in the open market, which was accompanied by a surge in the price of gold coin.

News ID: ۷۴۵۹۳۸

29 August 2018

On the Central Bank of Iran's website Sana that reports the average exchange rate handled by exchange bureaux, the US dollar's exchange rate was lower: 106,740. The euro was traded at 89,693 in exchange houses.

The rally comes on the back of the market heating up on Monday in expectation of President Hassan Rouhani's appearance in parliament on Tuesday.

As it turned out, markets did not have a favorable view of what transpired in     the Majlis, as lawmakers said they were not convinced by Rouhani's explanation about the country's economic woes, Financial Tribune reported.

In the parliament, Rouhani faced grilling by hardline MPs who voiced discontent over rising unemployment and inflation and largely blamed the administration for the country's economic troubles.

They also blamed the government for failing to prepare the country for the shock of America reimposing sanctions this month after it pulled out of the nuclear deal that it had signed with Iran in 2015 (together with China, Russia and a group of European countries).

The rial has lost more than half its value since April.  Reports from the open market suggested that the US dollar was traded for 109,800 on Tuesday and once again approached the new psychological threshold of 11,000 rials.

The benchmark Bahar Azadi gold coin was up 2.11% on Tuesday and fetched 40.64 million rials ($370), Tehran Gold and Jewelry Union's website reported.

On Sunday, the parliament also voted to sack the Economy Minister Masoud Karbasian. On July 30, the currency bottomed out at 119,000 rials to the dollar, a record low. As a result, prices of some staple foods and raw materials increased, putting the pressure on low-income groups.

The government and the Central Bank of Iran have implemented a series of measures to shore up the rial, some of which turned out to be counteractive.

The government had unified the US dollar's exchange rate at 42,000 rials on April 9 in response to volatility that saw the rial sink to all-time lows against the greenback.

At the time, it also banned the physical trade of hard currency by exchange shops and the trading of US dollar at any rate other than the official rate.

However, the policy led to an unprecedented rise in demand for imports at the cheap currency rate, forcing the government to ditch that policy in favor of more open market ones.

Criticism of the government's forex control also intensified when reports of widespread abuse and rent-seeking by the recipients of cheap currency were disclosed.

Later, the government allowed a secondary market to be formed where a limited number of non-oil exporters could offer their hard currency at negotiated rates.

On Aug. 6, it eased foreign exchange rules and allowed money exchange offices to resume work at open market rates as part of the rescue package intended to calm the markets.