The CBI issued a statement on its website announcing that certified exchange bureaux can sell currency in the form of banknotes to a ceiling of €5,000 or equivalent in other currencies at market rates.
Prior to the directive, exchange bureaus could only sell currency for non-commercial needs only for 23 defined purposes. Those included currency needed for students’ tuition fees, costs of aviation companies, registration fees for international tests and fees for educational and research courses in and outside the country.
As part of its new approach, the CBI has focused efforts on the open market in order to curb demand and counter speculative and unregulated trade by middlemen who now have a voice on the market trajectory, Financial Tribune reported.
President Hassan Rouhani on Wednesday weighed on issues surrounding the increasingly volatile currency market saying that he prefers a "moderate" exchange rate.
The president rejected charges leveled at his administration that it favors a weaker rial to plug its budget deficits, describing them as "lies and slanders."
He said his government is exercising extra cautious in its bid to calm the currency market so as not to exhaust its resources when more US sanctions start on November 4.
The Majlis on Wednesday held a closed session during which First Vice President Es'haq Jahangiri said the decline in foreign exchange rates would continue.
The rial continued its rally on Tuesday after weeks of depreciation had sent it to a series of record low. New gains for the national currency came unexpectedly as people in increasing numbers rushed to exchange shops to convert their greenbacks into the local currency.
On Wednesday, the dollar rate stayed below the psychological threshold of 150,000 rials according to currency websites. But the official websites, including sanarate.ir, were not accessible.
The bearish trend for foreign currencies is attributed largely to the government bestowing more power to the central bank to intervene in the foreign exchange market to prop the rial. The High Economic Coordination Council of the Heads of the Three Government Branches gave new powers to the CBI on Tuesday including the ability to issue rial and forex bonds and conduct open market operations.
Causes of Instability
In an interview with the state TV late Tuesday, the head of Majlis Economic Affairs Commission Mohammad Reza Pour-Ebrahimi confirmed that one of the reasons behind the reversal of fortunes of hard currencies was the CBI’s intervention in managing liquidity. He said when the government bestowed more power to the CBI and more latitude was given to exchange bureaux and restrictions on currency imports were abolished, a large volume of foreign currency flowed into the country.
One of the positive outcomes of the measure is that the bank is now able to better manage non-oil export revenues, he said.
“These measures were effective in lowering forex rates. We hope the rates will stabilize,” Pour-Ebrahimi added.
Also exchanging views during the TV program was a former official with the central bank, Kamal Seyyed Ali, who said the bullish trend in forex rates, which caused them to reach as high as 190,000 rials to $1, was ‘unreal’ and lacked logic.
The central bank’s lack of intervention in the forex market during the past three months was one of the reasons behind the irritating and irrational hikes – unseen and unheard of after the revolution in 1979.
He emphasized that the unsteady forex market is not the proper platform for investment.
The lawmaker considered the fourfold-increase in forex rates during the past six months as completely irrational and said non-oil exports would reach close to $60 billion this year (March 2018-19) and oil revenues during the first six months of the current fiscal (March 21- September 22) was higher compared to the same period last year. He put the country’s forex reserves at $100 billion.
“With this amount of forex reserves, even if we don’t export oil, we can manage the country for three years. As such, we don’t have a currency shortage,” Seyyed Ali told the primetime TV program.