CBI Moves to Sideline USD

EghtesadOnline: As part of the latest measure to ditch the US dollar from the country's transactions, the Central Bank of Iran has removed the American currency from the list of Sanarate.ir, the website reporting the exchange rate of foreign currencies based on exchange bureaux information.

News ID: ۷۸۳۷۸۲

26 August 2018

The website reportedly stopped showing the US dollar exchange rate as of Sunday. As a result, those wanting to know the dollar's exchange rate will have to directly approach the exchange houses.

Instead, Sanarate has selected the euro, Chinese yuan and Emirati dirham as its three major currencies, with other currencies such as the British pound, Swiss franc and Canadian dollar also quoted at the bottom.

The move came on the heels of the US dollar leaping ahead of the euro this week, which was considered odd by businesspeople, according to Financial Tribune.

In April, Iran started reporting foreign currency equivalents in euros rather than the US dollars, as part of the country’s effort to reduce its reliance on the US currency due to political tension with Washington.

This policy is also aimed at encouraging government bodies and affiliated firms to increase their use of the euro at the expense of the dollar.

Bank transactions involving the dollar are already difficult for Iran, because legal risks make US banks unwilling to do business with Tehran. Foreign firms could also be exposed to sanctions, if they conduct Iranian deals in dollars.

France said in February that it will start offering euro-denominated credits to Iranian buyers of its goods later this year to keep its trade out of reach of US sanctions.

The volatility in the currency and gold markets intensified after US President Donald Trump announced in May that he is pulling his country out of the multilateral nuclear deal Iran signed with world powers in 2015.

Earlier this month, Washington reimposed sanctions on Iran’s purchase of US dollars and its trade in gold, precious metals, metals, coal and industrial software.

Last summer, a dollar fetched about 38,000 rials on the open market. Since then, the rial has lost more than 60% of its value. On July 30th, it bottomed out at 119,000 rials to the dollar, a record low. As a result, prices of some staple foods and raw materials have increased, putting the pressure on low-income groups.

Psychological Effect

Commenting on the move to eliminate the US dollar from Sanarate, Majid Reza Hariri, the deputy head of Iran-China Chamber of Commerce, said it has been years now that the US dollar has been practically removed from the country's trade transactions, as letters of credit are no longer opened in dollars.

He, however, said that after financial reporting shifts to euro, there will be extra work to do. For instance, one has to first convert other currencies to the US dollar, as some currencies like dirham are directly pegged to the greenback.

"By removing the US dollar from Sanarate, the policymaker has made a psychological decision instead of one fixated on a computational basis," Hariri was quoted as saying by IBENA.

He added that the market would continue to do its own work because the rates announced in Sana and Nima–the venue where secondary market rates are negotiated between exporters and importers– do not reflect the market reality.

The euro's exchange rate was announced at 92,635 rials on Sana.

Reports from the unofficial market suggested that the US dollar was traded for about 104,600 rials on Sunday. The official rate of the greenback was 42,000 rials, CBI reported.

The gold coin gained 1.37% on Sunday and fetched 38.38 million rials ((€414), Tehran Gold and Jewelry Union's website reported.