Iranian currency hit a record low on Sunday at 100,000 rials to the dollar one day after Abdolanasser Hemmati formally took over as the new Central Bank of Iran governor.
The gold coin also accelerated its bull run with the benchmark Bahar Azadi being trade at 40.26 million rials ($915 at the official exchange rate) in midday trade after approaching the 45-million-rial mark in early trade. In late trade, the dollar's exchange rate had reportedly reached 120,000 in the unofficial market in Tehran, according to Financial Tribune.
Other major currencies were also bullish against the rial with each British pound selling for 143,290 rials, euro for 127,450 rials and Emirati dirham for 29,770 rials. The euro and the pound were up against the rial by 12.78% and the dirham gained 12.81% against the Iranian currency, Tehran Gold and Jewelry Union’s website reported.
The rial has lost more than half its value against the dollar in just four months, having broken through the 50,000-mark for the first time in March.
The government attempted to fix the rate at 42,000 rials in April and said it would crack down on black market traders.
The currency collapse has been intensified after the US announcement in May that it was pulling out of the 2015 nuclear deal, which lifted certain sanctions in exchange for curbs to Iran’s nuclear program.
The US is set to reimpose its full range of sanctions in two stages on August 6 and November 4, forcing many foreign firms to cut off business with Iran.
A senior member of the Iran’s Gold and Jewelry Union told ISNA that it was no longer possible to predict the price of gold coin and hence its futures trade has been halted in Iran Mercantile Exchange.
Ascribing the original gold rally to the heated foreign exchange rates, Mohammad Kashti-Aray said the suspension of the futures trade has also exacerbated the rally by bringing more liquidity to spot trade.
Hemmati’s Stance
During his inauguration ceremony on Saturday, Hemmati said his priorities include the protecting the central bank’s reserves, curbing inflation, addressing problems besetting banks’ balance sheets and stopping the unbridled surge in liquidity.
Unlike his predecessor Valiollah Seif, who attributed the currency market volatility to non-economic factors like external political influences, Hemmati said on Saturday that the current conditions are the byproducts of “imbalances in banks’ balance sheets, unwise decisions in using monetary tools and uncertainty in enforcing forex policies”.
He said that in order to control the forex market, he has devised a plan and discussed it with President Hassan Rouhani, which will be unveiled soon.
The government decided to unify the US dollar’s exchange rate at 42,000 rials on April 9 in response to volatility that saw the rial sink to all-time lows against the greenback.
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.
However, after a deluge of demand for imports at the attractive unified rate, the government had to allow limited forex trade through a secondary market at “negotiated rates” between exporters and importers of small-scale goods.
The secondary forex market, which began work earlier this month, also failed to calm the market in an effective way since, according to analysts, it lacked enough depth and scope.
Some local media reported on Saturday that the government is about to remove a significant portion of goods from the list of imports eligible to receive cheap currency and expand the secondary forex market.
A government official told Mehr News Agency on Saturday that the administration is preparing to add minerals and petrochemicals–the largest cash sources of non-oil revenues–to the list of secondary market players and thereby transform it from its current anemic form.
The news had positive effects on the market, especially the bourse, but has yet to be implemented.