Over the past week the dollar has been of the declining order after solid gains for months and falling rates gained momentum after the Democratic Joe Biden was declared Saturday winner of the US presidential election.
The greenback plunged after a wave of panic selling by perturbed investors and the CBI seized the opportunity by increasing offers and quoting lower rates at selected CBI moneychangers.
After losing more than 18% during three consecutive sessions, the USD was quoted much lower on Sunday by the Melli Exchange affiliated to Bank Melli Iran.
The state-owned moneychanger tagged the selling rate for the USD at 228,900 rials in the early hours on Sunday, which was 16,900 rials lower than Saturday’s closing price, eghtesadnews reported.
As in the past three sessions, it again refused to buy currency from the people and quoted only selling rates.
The moneychanger later in the day raised the forex rates as open market traders resisted further declines. At CBI-affiliated exchange shops the greenback closed at 235,000 rials, down 4% compared to Saturday.
Refusal to buy currency in tandem with efforts to pull down rates by offering lower prices seems to be the central bank's handiwork to saturate the supply side by injecting currency in the market.
In a notice on its website, the CBI's public relations office said it offered $33 million in hard currency at the regulated forex market on Sunday. The CBI said it sold an average of $65 million every day to exchange bureaus in the regulated forex market last week.
The regulated market is a network of banks and certified moneychangers working under CBI auspices and deals in wholesale trade.
Promoting Market Mechanisms
In a post on his social media account on Saturday, CBI Governor Abdolnasser Hemmati said the regulator wants to create the conditions wherein forex trade would be the function of “market mechanisms."
Alluding to the impact of the US election result the domestic currency market, he said the CBI "performs irrespective of external political developments".
He went on to say that the "CBI's approach is defined by national economic interest, the need for stability in markets and inflation target."
The central bank set the inflation target for current fiscal year (ends in March 2021) at ± 22%, a rather tall order that many say is difficult to achieve due to high inflation expectations among the public and steep volatility in financial markets.
Despite the authorized exchange shops efforts to pull down rates, major foreign currencies gained in Tehran's free market on Sunday as the post-US election excitement cooled.
Recovering from decline in the early hours, the American currency closed at 253,000 rials, up 2.3%, or 6,000 rials compared with the earlier session.
The euro and the UK pound sterling were almost unchanged compared with a session before, fetching 306,050 rials and 339,000 rials, respectively. The UAE dirham was up 2.8% gaining 2,000 rials to be worth at 70,000 rials.