Currency Rates Climb in Tehran for 3rd Straight Day

EghtesadOnline: The rial extended a losing streak against major currencies for the third day on Wednesday, pushing the Central Bank of Iran to intervene in the market to restore some semblance of calm.

News ID: ۷۴۹۷۷۱

29 February 2020

The US dollar was traded 158,000 rials on Tehran’s open market for the day, up 2,000 rials compared to an earlier session. Euro changed hands for 171,000 rials, higher than 168,000 rials on Tuesday’s close, Financial Tribune reported.

Currency rates at moneychangers affiliated to the CBI soared 5.3% daily, rising from 148,000 rials to 156,000 rials on Wednesday. The euro rose 6.3% climbing to 169,000 rials.

CBI’s affiliated moneychangers are one of its arms in regulating the often chaotic currency market.  The sharp 8,000-rial increase in one day is seen as the CBI’s first serious response to recent market volatilities.

The move can be interpreted in two ways by market observers. Some see the CBI’s move as an attempt to reduce price arbitrage between the open market and bank-based exchange bureaus.

The price gap widened as high as 1,000 rials in recent days, driving currency buyers to rush to CBI moneychangers for cheaper currency.

A second view is that the increase in currency prices by CBI  moneychangers is a signal that the regulator may want to take a more active role in the currency market.

The CBI on several occasions has taken credit for maintaining forex stability by what it says is “through balancing demand and supply.”

In response to the new bout of currency market volatilities, the CBI had remained largely passive and its moneychangers have resisted pushing up prices.

Earlier in the week, CBI Governor Abdolnasser Hemmati said the CBI will not despair or be pushed into desperation due to the turbulences visiting the already fragile foreign exchange market.

"Some market players are trying to undermine the currency market stability…Our response to market volatilities will be premised on sagacity. We will continue to use our tools wisely to eliminate rent-seeking operations and stabilize the market," he wrote on his Instagram account.

Gold a Bit Lower

Gold prices dipped slightly on Wednesday. The Emami gold coin dropped by about 0.7% or 400,000 rials and was worth 61 million rials, according to Tehran Gold and Jewelry Union.

Bahar Azadi gold coin was traded at 60.9 million rials during the day – down 0.16% compared to the previous day's close.

Gold prices have increased at the same pace with currency prices in recent days. The slight decline is mainly due to the drop in the precious metal price in international markets a day earlier.

On Wednesday, gold prices rose after a sharp drop in the previous session, as a US warning of an inevitable pandemic prompted investors to seek refuge in safe-haven assets, According to Reuters,

Spot gold rose 0.7% to $1,646.19 per ounce for the day, having slumped as much as 1.9% in the previous session. On Monday, the yellow metal touched the highest in more than seven years at $1,688.66.