The downward trend gained momentum on Tuesday when one dollar was traded below the supportive level of 120,000 rials for the first time in the current fiscal year that started on March 21.
Each USD changed hands for 119,000 rials in later hours of trading day on Tuesday, down 3.3% compared to Monday’s close when it was traded for 123,000 rials.
The euro was worth 136,000 rials, down 5,000 rials and the UK pound sterling fetched 150,000 rials, Financial Tribune reported.
What is unfolding is apparently attributed to CBI policies to stabilize the forex market and help revive the ailing national currency.
According to a Bloomberg report on Sunday, the currency plummeted more than 50% after US President Donald Trump tore up the landmark 2015 Iran nuclear accord and reimposed sanctions last year.
The rial strengthened about 8% in the open market over the month to July 14 when the greenback was valued at little more than 125,000 rials, according to prices compiled by Bloomberg from foreign-exchange websites and traders in Tehran.
In a similar vein, state-owned news outlet, IRNA, reported on Tuesday that the rial has regained 21% of its value over the past 66 days to July 15.
Since the beginning of the year, the maximum USD price was quoted on May 9 in the open market when it fetched 154,000 rials.
Unified Rates
The declining pattern could be a step forward to bridge the gap between forex rates in Nima (Integrated Forex Deals System) and the open market, which in turn, should pave the way for CBI to launch the regulated forex market.
The system is being set up with the participation of banks and certified exchange shops under CBI oversight to bring a semblance of discipline to the chaotic forex market and centralize currency trade into a unified regulated market.
Although the market was created two months ago, it has not been officially launched, apparently due to concerns over its unpredictable impact on the forex market.
An obvious issue of concern is the disparate forex rates in Iran’s market, which observers say is an obstacle to market stability.
The much narrowed gap between forex rates in Nima and open market can be explained by the regulator’s efforts to address this key concern.
Mahmoud Shekasteband, head of the company overseeing regulated forex market, confirmed earlier in the week that the market is waiting for the opportune time to be inaugurated in order to have the best possible impact on the currency market.
Nima is a secondary market developed by the CBI where companies sell their export earnings at rates lower than the open market. The currencies sold on Nima are only for importing goods.
With the USD slipping below or near 117,000 rials in Nima, it could be said that the difference between two rates is now blurred and time ripe for CBI to launch the market.
It remains to be seen whether the CBI intends to fix the two rates at this point or let the rates decline further.
Gold Also Falls
Unlike the soaring price of the precious metal in international markets, gold prices in the domestic market are on the downward trajectory influenced by the bearish trends in the forex market.
Each Imami gold coin changed hands for 39.4 million rials on Tuesday, down 2.32 million rials, or 5.9%, compared to a day earlier. Benchmark Bahar Azadi fell 5.1% and sold for 38.94 million rials for the day.
The market was partly down due to increase in supply as more investors in the gold coin came to market as sellers.
“Those who have gold coins have seemingly come to the conclusion that gold is no more profitable,” Mohammad Keshtiaray, head of the National Gold and Jewelry Union, was quoted as saying by ISNA.