Rules for launching an official foreign exchange market were approved by the Money and Credit Council - a top financial decision-making body headed by the governor of Central Bank of Iran.
According to the CBI website, the move seeks to organize and establish a transparent market where foreign currency will be traded in cash through an electronic platform in line with MCC regulations.
The move is another CBI effort to regulate the market long dominated by informal traders. Currency trade went underground in the spring and summer of last year when the central bank banned all currency trade outside the banking system including the certified exchange bureaux.
CBI boss Abdolnasser Hemmati said in November the function of the market will be to discover prices and provide the people’s small needs and services.
He said the market will be launched with participation of banks and certified exchange shops under CBI supervision, adding that the focus of the market will initially be on cash transactions.
Exporters can also offer a part of their currency earnings in this market, he said, and hoped that the move would improve transparency and create the conditions for a moderate exchange rate.
In September 2018 the Supreme Economic Council, an ad hoc decision-making body, headed by President Hassan Rouhani and the heads of parliament and the judiciary, gave the central bank governor authority to intervene in the currency market and take measures to stabilize the chaotic forex rates.
Thanks to the CBI intervention, the currency market seems relatively stable after the US reimposed new penalties targeting Iran's oil and banking sectors in November.
On Wednesday the forex market saw some limited volatility with the US dollar crossing the resistance level of 110,000 rials. But the Sana rate, an online platform which records the average of rates across exchange shops, the US dollar was traded for 107,800 rials.
Forex-Based Rial Deposits
The MCC also approved executive guidelines last month for opening forex-based deposit accounts in rials.
As per the guideline, forex-based accounts are time investment deposits in nature where money is deposited in rials and applicants can open accounts individually or jointly.
In these accounts banks function as the proxy and use the deposited money to invest in foreign exchange on behalf of the depositors.
According to the guideline, the deposited amount will be received and repaid on demand in rial, but the base exchange rate would be determined through the average balance rate for cash sales quoted by SANA a day prior to the opening of the account and the average rate for forex purchases quoted a day prior to the withdrawal or closing the account.
SANA is an electronic system developed by the CBI to that announces average forex rates from across exchange shops in real time.
“The move will help depositors to minimize investment risks,” Hemmati told IBENA on the sidelines of the weekly cabinet meeting on Wednesday.
Nominal Measure
On the proposal the CBI recently sent to the government to lop four zeros off the national currency, Hemmati said rial's exchange rate against other currencies is very high and needs to be corrected.
“This is just a proposal that should be reviewed by the cabinet and then sent to the Majlis to become law.”
He rejected as unfounded claims that removing the zeroes would have a positive effect on economic growth and inflation. “We don’t make such claims…this is a nominal measure.”
