Currency rates are declining and have hit the lowest level Sunday compared to the past three months following mixed economic and political developments in and outside Iran.
The rial clawed back from the three-month lows since March. On Sunday the USD dropped below the psychological level of 130,000 rials for the first time in the current fiscal (started in March) and traded at 127,500 rials in Tehran, down 3% compared to Saturday trade.
The greenback posted the fourth straight decline on Sunday. The euro changed hands for 147,000 rials -- down from 150,500 on the Saturday’s close and the UK pound was worth 164,000 rials.
According to the Persian-language economic newspaper Donyay-e-Eqtesad, the Central Bank of Iran has had an upper hand in the forex market thanks to investor caution vis-à-vis future uncertainties.
CBI Governor Abdolnasser Hemmati had said earlier that the bank would intervene in the market “if and when it deems necessary.”
The added caution emanates from a combination of both positive and negative news that has made it rather difficult for investors to predict what would or could the future hold.
One positive report is about the visit of the Japanese prime minister’s visit to Tehran which has spawned speculation that he seeks to mediate between Iran and the United States and help reduce the existing tensions.
Shinzo Abe will meet President Hassan Rouhani before a session with the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei.
His June 12-14 trip, which was planned following his recent meeting with Donald Trump in Tokyo, is the first by a Japanese premier since the 1979 Islamic Revolution.
Iran-US ties took a turn for the worst after President Donald Trump last year pulled out of the 2015 nuclear deal Iran signed with the six world powers.
Risk of Military Hostilities
The friction reached critical levels in recent months with both sides adopting a tougher stance, raising the risk of military conflict in the already chaotic and unstable Middle East.
The currency market fell to the surprise of most observers as they expected a negative market response to the new US sanctions on Iran’s Persian Gulf Petrochemical Industries Company (PGPIC).
The US Treasury announced in a statement on Friday the move aims to choke off financing to the country’s largest and most profitable petrochemical group and extends to its 39 subsidiaries and “foreign-based sales agents”.
The petrochemical sector is the second-most important industry in Iran after oil and gas.
Among different views and reviews of the latest US sanctions, the market was seemingly dominated by the mindset of investors who are skeptical about the efficacy of the new restrictions to significantly hurt petrochemical exports. They argue that Iran’s petrochemical sector, like many other industries, has been under some form of sanction for decades.
However, other observers ascribe the decline in currency rates to the news about the regulated forex market in the comings days.
The market, scheduled to start work later this month, aims to stabilize the frenzied foreign exchange market that has seen more than its fair share of ups and downs over the past several years.
Gold Market
The gold market, which is normally influenced by both the local and global currency markets, continued to lose value on Sunday following the decline in forex rates in the domestic market and indifferent to the hike in the global value of the yellow metal.
The benchmark Bahar Azadi coin lost over 1.2 million rials, or 2.8%, on Sunday to close trading day at 43.19 million rials ($337.4). Each Imami gold coin changed hands for 44.58 million rials, down 670,000 rials compared to a day earlier.
According to Reuters, gold prices jumped 1% on Friday to their highest levels since April 2018 as a sharp slowdown in US jobs growth sent the dollar lower on growing expectations that the US Federal Reserve would cut interest rates this year.
