Abdolnasser Hemmati made the announcement in a meeting with Mahmoud Shekasteband, the CEO of the company that will oversee the new currency market, the CBI’s official website reported.
The Regulated Forex Market Company was registered in late April and has launched pilot trade since then.
Shekasteband discussed the latest banking and forex developments with the CBI chief and the two sides reviewed results of the pilot operation to ensure the smooth launching of the long-awaited mechanism designed to give a semblance of stability to the volatile currency market, Financial Tribune reported.
Hemmati expressed the hope that the new market would help “discover the real value of foreign currencies” in the domestic market that has seen more than its fair share of fluctuation in the past several years, in particular since the spring of last year.
Leaving behind a market shock after imposition of the first round of US sanctions against Iran’s oil export in 2012, the forex market was relatively stable up until last April. Things took a turn for the worst after the US administration left the nuclear deal and announced it would impose new round of sanctions, causing the USD to suddenly surge from a little less than 40,000 rials in April 2018 to above 180,000 rials by the end of September.
Thanks to CBI’s interventions in the forex market, USD fell again in October to about 110,000 rials. The greenback fluctuated mainly between 130,000-150,000 rials since then before it fell near 120,000 rials this month.
Explaining the reasons why the latest mechanism was delayed several times, he said the regulator wants “to do away with the trial and error methods ensure that everything is in its proper place” before the market starts work.
Shekasteband had said earlier in the month that the new mechanism is “waiting for the opportune time” to be inaugurated in order to have the best possible impact on the forex market.
Need for Single Rate
Steep fluctuations in forex rates in the domestic market are seen as a major obstacle to the regulated mechanism. Economic experts, businesses and major stakeholders insist that a single currency rate is “the prerequisite” to a stable currency market.
In the past few months the CBI has managed to pull closer currency rates in the open market and secondary market (known locally as Nima).
The gap between two forex rates has reduced to less than 5,000 rials for one dollar from the average 58,000 rials during the first month of current calendar year (started March 21)
It appears that now is the time to open the regulated market.
The regulated market was announced after the CBI decided to restore stability to the chaotic forex market. In the early stages, major foreign currencies will be traded in cash via an electronic platform in an open and transparent environment.
Traders in regulated market will deal in wholesale currency and retail forex trade will be the function of money changers outside the regulated forex market.
The market is being launched with the participation of banks and certified exchange shops under CBI oversight.
Iran Fara Bourse (the junior stock market) along with the Association of Private Banks and Credit Institutions, Association of Bureaux de Change Operators, representatives from public banks are key stakeholders in the new financial setup.