Iran Secondary Forex Market Trade Buoyant

EghtesadOnline: While the unofficial currency market enters a bull run, a Central Bank of Iran official said trade in the Secondary Forex Market is increasing, with deals breaking a record on Tuesday.

News ID: ۷۸۳۹۴۷

10 September 2018

Mehdi Kasraei-Pour, the head of CBI's Department for Forex Polices and Regulations, said in an interview with the state television late Tuesday that trade volume in the secondary market, which takes place through the online currency trade system locally known as Nima, hit €78 million on Tuesday–the highest figure since the market was first launched by the government on April 11.

Kasraei-Pour said the average exchange rate for the European currency since the market was liberalized on August 7 has been 89,000 rials.

The average exchange rate for the US dollar, he said, has been 76,000-77,000, according to Financial Tribune.

The government on August 6 eased foreign exchange rules and allowed exchange bureaux to resume work at open market rates, as part of its latest rescue package intended to calm the volatile market.

Announcing the measures, CBI Governor Abdolnasser Hemmati hoped that his bank would never have to interfere in the market so that it will "balance" by itself.

The new policy came after the government had abruptly decided to unify the US dollar's exchange rates at 42,000 rials on April 9 in response to the intensifying currency crisis.

At the time, it also banned the physical trade of hard currency by exchange shops and the trading of US dollar at any rate other than the official rate.

But criticism about the government's forex control became louder when reports of widespread abuse and rent-seeking were disclosed by those who got access to cheap currency.

Acknowledging the flaw of the first policy package, Kasraei-Pour said due to the significant gap between the official currency rate in Nima and that of the "black market" at the time, exporters became less willing to offer their hard currency in the secondary market.

Exporters and importers can now negotiate the rates among themselves.

Kasraei-Pour emphasized that CBI only recognized the secondary market as "real" and not the unofficial one where exchange rates are surging.

He explained that essential goods, medicine and some raw materials will continue to receive cheap currency at the rate of 42,000 rials until May 21, 2019, as per the decision of the central bank.

The hard currency for essential goods comes from the export of oil and gas condensates.

As for the secondary market, he said its revenues are supplied by non-oil exports, including petrochemical, steel and mineral products.

Some economists believe that the secondary market, due to its sheer size, is a more reliable indicator for the exchange rates than the unofficial market where dealings are very limited.

On the open market, the rally continued on Wednesday with the US dollar being offered for as much as 143,000 rials, having crossed another resistance level. Later in the day, however, it lost some ground and fetched 137,000 rials.

The euro was traded for 166,710 rials, gaining 5% on the previous day, according to Tehran Gold and Jewelry Union's website.

The gold coin, after an initial rally, dropped slightly and fetched 45.40 million rials ($487).

Hemmati Going to Parliament

Mohammad Reza Pour-Ebrahimi, the head of Majlis Economic Commission, announced that Hemmati is due to appear in the commission on Saturday to review the country's foreign exchange policies.

"Nearly a month has passed since the [implementation] of new forex policies. The CBI chief will present a report regarding the need to assess the strengths and weaknesses of those policies and the way they are implemented or the lack thereof," he was quoted as saying by IBENA.

In another move to calm the market, CBI notified a directive to certified exchange bureaux on Wednesday, allowing them to import currency from their own resources and also 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".

The directive is aimed at easing forex controls and injecting more currency into the market.

As per an earlier directive by the bank, 23 needs have been identified, for which applicants can go to exchange shops and buy foreign currency.

It includes travel currency, with travelers being able to obtain up to €5,000 by showing relevant documents such as ticket, passport and visa.

Other needs that can be met by an exchange shop are by furnishing documents related to medical treatment, college tuition and sabbatical.