According to Tehran Gold and Jewelry Union’s website, the unofficial US dollar has gained 200 rials during the first four days of autumn, with rial quoted at 39,120 to the dollar on Tuesday.
The official rate has also been fixed 80 rials higher to reach 33,645 to the dollar.
The greenback, which is still the most widely traded currency in Tehran’s foreign exchange market, reached its highest unofficial value since the beginning of the new Iranian year (March 21) in the last month of summer when its exchange rate reached 39,200, according to Financial Tribune.
However, euro remains stable market with a slight upward trend these days, after the value of the European currency hit a four-year high in Tehran’s currency market in the last days of August. Euro changed hands for 47,130 rials in the open market on Tuesday, up from 46,880 rials on the last day of summer (Sept. 21).
According to the secretary of the Association of Bureaux de Change Operators of Iran, demand for travel currency is the major reason behind the rally of widely traded foreign currencies in Tehran’s market.
“The volume of overseas travels significantly rose during the last month of summer, which pushed the demand for foreign currencies and led to a bullish market,” Amir Nojoumi was also quoted as saying by Fars News Agency.
Nojoumi noted that the market has kept its appetite for high-demand currencies like US dollar, euro, Emirati dirham and Turkish lira as we have entered the holy Islamic month of Muharram when large numbers of Iranians travel to Iraq to make a pilgrimage to the revered Shia shrines in the cities of Karbala and Najaf to mark a period of mourning on the martyrdom anniversary of Imam Hussein (PBUH).
“More than two million Iranian pilgrims go to Iraq during the month of Muharram. Now imagine if each pilgrim buys $100, which will translate into a $200 million demand in the market,” he said.
Nojoumi referred to the Central Bank of Iran covering the market demand when necessary, which measure will continue for now.
However, demand for travel currency cannot solely account for the significant leap in forex demand in Tehran’s market. The recent interest cuts have also stirred renewed interest among investors in the foreign exchange market.
Less than a month ago, CBI required all banks and credit institutions to set their annual and fixed interest rates at 15% and 10% respectively, which caused a section of investors to move their money into the foreign exchange market for more profit.
This is while in its latest directive, CBI announced that the scheme allocating $300 to travelers at official rates—that are about 600 rials lower for each dollar compared to open market rates—has been abolished as of September 11. This is also expected to impact the forex rates.
Recent hurricanes in American southern states also affected the USD rates in both international and Tehran markets. Hurricanes Harvey and Irma that hit Texas, Louisiana and Florida in the US last month led to more than one-fifth of the US refining capacity to shut down, which significantly reduced the demand for oil and increased USD rates.