The dollar broke past the critical level of 250,000 rials, the highest since July 18. It gained 5,000 rials, or 2%, compared with Monday’s close to reach 253,000 rials.
One euro was worth 298,000 rials, up 5,000 rials, or 1.7%, and the UK pound sterling jumped to 329,000 rials.
Iran’s forex market is facing unseen demand in the past several weeks as seen by long lines of currency buyers in front of CBI- affiliated moneychangers.
The price arbitrage between prices quoted in the open market and licensed exchange offices has apparently given rise to “artificial demand” for major currencies.
The so-called bank-based exchanges usually sell a limited amount of forex at lower rates tempting buyers to line up for cheaper currency and sell it to middlemen at higher prices.
Over the past few years as per law each Iranian can buy a limited amount of currency. Authorized moneychangers are allowed to sell no more than $2,200 to one person in one year. Buyers are obliged to show their ID card before buying any foreign currency.
The price arbitrage between bank-based moneychangers and the free market went as high as 26,000 rials. Despite widening price arbitrage, dollar rates at the former rose slightly on Tuesday.
Given the widespread nervousness in the stock market in recent days, investors have reportedly shifted to the already chaotic currency market. Allured by lucrative gains, people have been lining up to buy cheap currency at CBI’s moneychangers and sell it to make a quick buck.
The buying and selling the $2,200 earns 40 million rials for the person who buys the currency quota from bank-based exchange shops and sells it on the same day, according to Persian-language economic newspaper, Donya-e-Eqtesad.
News outlets reported on heavy injection of foreign currency by the CBI in the past few days to meet the insatiable demand but to no avail.
Tehran’s Persian-languge economic news website, Eghtesadnews said CBI moneychangers injected 220 million UAE dirhams into the market on Sunday.
The CBI public relations office said Monday that the central bank is “present” in the market to meet “real demand” for foreign currencies. What exactly the term real demand meant was not clear.
The bank estimated daily demand for hard currency in the market to be in the region of $5-8 million.
Gold Higher
The gold market was also bullish amid soaring currency prices. Each Emami gold coin was sold for 115.6 million rials on Tuesday, up 1.2 % higher compared to previous day. The benchmark Bahar Azadi climbed 1% to 111 million rials. One gram of 18-karat gold sold for 11.22 million rials, up 2% overnight.
Gold prices steadied in a tight range in world markets on Tuesday, as doubts over a global economic recovery countered pressure from a stronger dollar ahead of policy strategies from central banks in Europe and North America.
Spot gold was steady at $1,929.50 per ounce, Reuters reported. The US gold futures rose 0.2% to $1,938.50.