New Restrictions on Forex Sale

EghtesadOnline: The Central Bank of Iran has ordered moneychangers to stop selling cheaper currency to people with unspecified needs.

News ID: ۷۸۷۳۶۴

28 November 2021

It said the regulator will continue allocating forex for 25 services, asking them to sell currency based only on the buyers’ needs as specified by the regulator, the CBI website reported.

Apart from the predetermined purposes, authorized exchange shops were allowed in the past to sell €2,000 or equivalent for “other purposes” to each Iranian in one year. However, the CBI now says allocation of foreign currency for miscellaneous purposes is not allowed, effectively restricting sale.

The latest move to limit forex sale is in line with efforts to tame volatility in the currency market and control “artificial demand”,

Up until today and as per law each Iranian could buy a fixed amount of currency every year at slightly lower rates compared to the open market.

Authorized moneychangers were allowed to sell €2,000 ($2,200 or equivalent in other currencies) to each Iranian in one year. Buyers must show their ID card before buying.

Buying a limited amount of currency at lower rates usually tempted buyers to line up for cheaper currency and sell it in the open market at higher prices.

In some cases, price arbitrage between bank-based moneychangers and the free market is 20,000 rials.

Put simply, buying and selling the $2,200 earns 40 million rials for the person who buys it from the bank-affiliated shops and sells it.

The CBI says the price arbitrage between the open market and licensed exchange offices has apparently given rise to “artificial demand” for the rare currencies.

The state-owned new agency, IRNA, earlier said CBI-affiliated moneychangers sold €1.5 billion between March to October this year.

IRNA spoke about a currency dealer who was accused of buying millions of dollars using the national ID cards of 3,000 people.

The domestic forex market is facing rarely seen demand in the past several days as seen by the long lines of buyers in front of CBI-affiliated moneychangers.

The dollar was choppy at the beginning of the trading session on Saturday, resuming a rally that had paused temporarily on Thursday.

The greenback closed above the critical 290,000 rials on Wednesday before retreating below the level on Thursday. The American currency came back on Saturday closing the session at 290,100 rials, up 0.24% on the last session.

Official exchange shops affiliated to the CBI tagged the dollar at 272,030 rials. The greenback took a drubbing in the wholesale market known as regulated forex market.

According to the Persian-language economic website Eqtesad News, the dollar lost 4.7% or 12,420 rials in the regulated market to settle at 264,810 rials.

The regulated market is a spot market operated by a network of banks and certified moneychangers dealing in wholesale currency and is supervised by the CBI.