Iran's Rouhani: Currency Volatility Due to Foreign Pressure, Domestic Issues

EghtesadOnline: President Hassan Rouhani on Saturday weighed in on foreign exchange volatility that has seen the rial sink to consecutive record lows since April, saying that the crisis has been triggered by both foreign pressure and domestic malpractices.

News ID: ۷۸۳۹۳۲

10 September 2018

"Today, there is disturbance in the currency market , a part of which is due to pressures from the United States and the outside, but I declare as the head of the government that a part of this volatility has a domestic origin," Rouhani said in his latest comments on the issue at an event in Tehran to commemorate Martyr Mohammad Ali Rajaei, a former president.

Elaborating on the domestic causes of the currency volatility, the president referred to exporters of state and semi-state organizations who withhold their hard currency from the online currency trade system Nima and described their action as "treason."

According to Financial Tribune, Rouhani said he had directed an official yesterday to first sack those who commit such violations and then refer them to a court of law to explain "why they harm the people of Iran to increase their own share".

The volatility in the currency and gold markets further 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 70% of its value. This week, it bottomed out close to 150,000 rials to the dollar, a record low, but went on to pare some of its losses.

On Saturday, when the markets reopened, the rally for rial continued, with the dollar reportedly changing hands for 132,000 rials in the unofficial market. On the website Sana, which records the average rate from exchange bureaux, the forex rate was 130,819. The exchange rate for euro and Emirati dirham on Sana were 95,333 rials and 21,146 rials respectively.

In what also came as a surprise in the gold coin market, the benchmark Bahar Azadi coin lost more than 4% of its value and fetched 42.85 million rials ($327). The coin has been rallying almost ceaselessly for the past four months.

The new calm in markets has been traced to a series of positive measures by the Central Bank of Iran in easing forex rules.

CBI notified a directive to certified exchange bureaux on Wednesday, allowing them to import currency from their own resources and to purchase the currency offered by exporters through Nima.

It said that currency exchange houses could then sell the currency at market rates to buyers "as per the CBI regulation".

Hemmati Weighs In

After a meeting with members of Majlis Economic Commission on Saturday, Hemmati doubled down on positive measures, announcing that in addition to exchange bureaux, exporters themselves can sell a portion of their earnings through Nima.

He added that although he has refrained from commenting on the trend of forex rates, a bearish market is taking shape.

The CBI chief also told the parliamentary news website that CBI would intervene in the market when it is necessary, thereby removing the widely-held belief that the bank was reluctant to expend its hard currency.

Mohammad Reza Pour-Ebrahimi, the head of MEC, said coordination between Majlis and CBI is now alive and well.

Pour-Ebrahimi added that over $8 billion are ready to be offered in the Secondary Forex Market while the total market demand is $4 billion.

"About $5.5 billion have been allocated to essential goods from the start of the year (March 21) and this is continuing," he said.

Rouhani also said on Saturday that the US constantly sends messages to Iran to begin negotiations.

"On one side they try to pressure the people of Iran and on the other send us messages every day through various channels that we should come and negotiate,” he said.