Forex at 20-Month High in Tehran Market

EghtesadOnline: Major currencies on Thursday hit the highest rates since September 2018 with the dollar traded at 180,000 rials in Tehran’s open market.

News ID: ۷۵۰۲۱۶

13 June 2020

One euro fetched 203,000 rials and the UK pound sterling 226,000 rials.

Following similar trends in the open market, moneychangers affiliated to the Central Bank of Iran also increased their rates to help reduce arbitrage in prices and balance the market – moves that so far have failed to curb the rising trend in prices.

The bank-based exchange bureaus sold the greenback for 177,500 rials on Thursday, up 5,000 rials, or 3%, compared to Wednesday’s close, according to market data from the Tehran Gold and Jewelry Union website.

The moneychangers had increased the dollar price by 3,200 rials on Wednesday in a bid to narrow the price gap with the open market, which jumped by 7,000 rials.

The currency market was relatively calm for about two weeks with the dollar fluctuating between 175,000-176,000 rials before soaring again apparently due to the latest US move to impose new sanctions on Iran’s shipping industry, the Persian-language economic newspaper Donya-e-Eqtesad reported.

US sanctions on shipping took effect on Monday after they were announced in December.

US secretary of state, Mike Pompeo, in a statement last Monday warned commercial and maritime companies, governments and others that they risk US sanctions if they did business with the Islamic Republic of Iran Shipping Lines (IRISL) and its Shanghai-based subsidiary, E-Sail Shipping Company, Reuters reported.

Donya-e-Eqtesad linked the hike in forex rates partly to the higher UAE dirham rates. The Emeriti currency is important because the Persian Gulf Arab state is a traditional trading hub for Iran’s export and import.

Each AED was worth 50,000 rials in Tehran on Thursday. Recalling the influence of the dirham rates on the domestic currency market, the newspaper said if dirham is fixed in the present rates “the dollar could jump to 183,000 rials in the near future.

Gold Surge

Spurred by the spike in currency prices, domestic gold buyers have been in the ‘buy-mode’ for months anticipating further price increases that now seems very likely.

This pushed up gold prices on average by 1% on Thursday. According to TGJU, the Emami gold coin surged more than 0.9% and was traded at 76.18 million rials ($430).

Bahar Azadi gold coin was worth 73.5 million rials, up 0.8% compared to Wednesday’s close. Likewise, one gram of 18-karat gold changed hands for 7.40 million rials -- up 100,000 rials, or 1.3%, compared to the earlier session.

On global markets, gold prices held steady on Friday as downward pressure from a stronger dollar countered rising safe-haven demand supported by gloomy economic projections and renewed fears over a second wave in Covid-19 infections.

Spot gold was flat at $1,727.24 per ounce, for the day. US gold futures fell 0.4% to $1,733.30, according to Reuters.

On Thursday, spot gold fell 0.5% on a stronger dollar.

The dollar index inched up 0.1%, after rising 0.8% in the previous session, making gold more expensive for holders of other currencies.

Back to Gold Futures

Shahin Cheraghi, a member of High Council of Securities and Exchange, said Thursday that the Central Bank of Iran is concerned about volatility in the gold market due to its impact on other financial markets.

He said the CBI Governor, Abdolnasser Hemmati, has instructed relevant officials to set up a special workforce to look into the prospects for resuming gold coin trade through future contracts at the Iran Mercantile Exchange, the IME’s news portal, imereport.ir.

After unprecedented volatility in the spot gold market in summer 2018 in the follow-up to steep increases in currency rates, the IME suspended all trade in gold coin futures.

Gold futures are standardized, exchange-traded contracts in which the buyer agrees to take delivery, from the seller, a specific quantity of gold at a predetermined price on a future delivery date.

The contracts are standardized by a futures exchange as to quantity, quality, time and place of delivery.

IME boss Hamed Soltaninejad said earlier the mercantile bourse is prepared to resume gold futures trading, noting that new gold coin futures have proved to be compatible with market rules and protect the interest of investors.