Business And Markets

Unified Currency Regime in Six Months

Unified Currency Regime in Six Months
Unified Currency Regime in Six Months

A deputy governor of the Central Bank of Iran said on Monday that a unified foreign exchange rate system is to be put in effect by the second half of this year ending March 2015.

Akbar Komijani said that the government and the CBI were determined to eliminate dual rates and move towards a unified currency regime in the near future. 

Presently, foreign currencies are priced differently so that official rates are lower than those traded in the free market. 

"The central bank will not let any instability to occur in the market after the system is adopted," Komijani said. 

In the past several months, the CBI appears to have taken a policy to devalue the rial's official exchange rate while it has started to strengthen its street rate at the same time, some analysts say. 

The rial's official exchange rates are being devalued by the CBI, in small increments on a daily basis, and although the price changes are barely noticeable at first glance, they are adding up fast. The 

While the official CBI rates have limited use beyond importing essential goods like food and medicine, the rates do show the bank's attitude towards market rates. "It can show us CBI's intention to meddle in the market," said a currency trader in Tehran. Moreover all government financing and reporting is done via said rates. 

On the market front, CBI's single exchange rate target is having markedly more pronounced effects. Though not officially confirmed, the bank seems to be making moves in Tehran's currency market, by making more dollars available to major bureaux de change in the city.

"The central bank has poured dollars in the market," said one bureau de change owner to Financial Tribune, "but demand is also low, people aren't buying." 

Iran's domestic currency market is a network of bureaux de change connected and monitored closely by the CBI with commercial banks playing little role. All other forms of currency trade are currently outlawed, making it relatively easy for the CBI to control market volatility.