Rial Takes a New Dive

EghtesadOnline: The US dollar made one more leap on Saturday extending a rally that has lasted for seven successive sessions. The greenback strengthened close to 5% against the rial in Tehran’s open market, adding 12,000 rials in one day to 252,000 rials.

News ID: ۷۵۰۴۶۷

19 July 2020

One euro was worth 285,000 rials, up 15,000 rials, or 5.5% daily and the UK pound sterling jumped to 310,000 rials.

Iran’s forex market is facing unseen demand in the past several months. High and rising demand aside, observers see a supply crunch reportedly due to the pattern of decline in Iran’s forex revenue.

Non-oil export value dropped by 44% in the first quarter of the current fiscal year (March-June) compared with the same quarter last year, Fars News Agency reported, citing customs officials.

Exporters are also being blamed for failure to repatriate their overseas earnings. In light of the steep decline in forex earnings and the burden of tough US economic sanctions, the government has put exporters under pressure to bring back their currency earnings.

The CBI has given an ultimatum to exporters to return their earnings of the past two years by the time the current calendar month ends on July 21.

Differences between prices quoted by the unofficial market and licensed exchange offices affiliated to the Central Bank of Iran has also given rise to “artificial demand” for major currencies.

The so-called bank-based exchanges usually sell currency at lower rates to regulate rates, encouraging buyers to line up for cheaper currency and sell it to dealers at higher prices.

Each buyer, however, is allowed to purchase a limited amount of currency via the exchanges. Authorized moneychangers are allowed to sell no more than $2,200 to each Iranian in one year.

The price arbitrage between bank-based moneychangers and the free market went as high as 22,000 rials. Despite widening price arbitrage, dollar rates at the former remained unchanged on Saturday.

They raised the price of the greenback to 231,000 rials on Thursday after resisting for a few sessions as price arbitrage with the open market widened.

Steep increase in the UAE dirham is also seen as one of the main drivers of other major currencies.  The AED was worth 695,000 rials on Saturday, up 3,500 rials from Thursday’s close.

The Persian-language economic newspaper Donya-e-Eqtesad said increase in dirham rates has fueled expectation about further hike in rates given its traditional impact on the domestic currency market.

The Emeriti currency is important in determining rates in Tehran because the Persian Gulf Arab state is a traditional hub for Iran’s import and export.

Gold Also Jumps

Influenced by trends in the currency market, gold coins also soared again on Saturday.

The price of one Emami gold coin went up 2.5% to 111.8 million rials, marking a 2.72-million-rial increase in one day and firming above the critical 110 million rials, according to data released by the Tehran Gold and Jewelry Union.

The benchmark Bahar Azadi too climbed 6.4% to 9109 million rials and one gram of 18-karat gold fetched 10.6 million rials, up 2.16%.