The rial continued its charge against foreign currencies on Wednesday, as speculation that talks between Iran and six world powers known as the P5+1 would come culminate in a deal wilted safe haven demand.
The greenback retreated versus the rial, despite its strengthening to 11-year highs in Forex markets, as nuclear talks optimism outweighed the resurgence in the US economy.
The dollar had its worst day since December first, falling 1.53 percent to a four month low of 33,320 rials by 13:14 GMT on Wednesday.
"The dollar broke below the 34,000 rial support level [on Monday]," a veteran trader told the Financial Tribune. "It is normal to see some downward momentum after breaking support levels."
Exchange owners were stunned by dollar's decline in Iran. "We see no reason for the selloff," a bureau de change owner told the Tribune. "A rebound in prices is likely, and could leave investors with loss."
Many bureau de change owners have taken huge losses in the past few days, as they had to manage their way through the selloff. "Anything I've bought since last Thursday, I have had to sell at a loss," said another bureau de change owner. "We're taking huge hits over these rumors. Even if there was a deal tomorrow, it would take a year for it to take effect."
The central bank seemed to be taking the back seat in all the mayhem, sources said. "The central bank hasn't intervened. It is operating as usual," sources close to the central bank told the Tribune, "investors are overreacting. Everybody thinks the deal is done."
Iran and the P5+1 are in the middle of nuclear talks over Tehran's energy program. If reached, all sanctions imposed on Iran will be lifted in exchange for it limiting its nuclear program.
Other Currencies
The battered euro was also slugged in Tehran on Wednesday, dragged down by the dollar’s decline and its dip in the global arena. It dived 2.33 percent to 36,050 rials, nearing its lowest in three years.
In the international markets, the euro took another plunge towards parity with the dollar on Wednesday, shedding over one percent to trade below $1.06 for the first time in 12 years as a 1.1 trillion euro bond-buying program began to bite.
The sterling proved more resilient against the Iranian currency, falling 0.58 percent to 51,320 rials by 13:14 GMT in Ferdowsi Street – the center of foreign exchange trading in Tehran, a four-month low.
Grim Gold
Gold coins also fell on Wednesday. Benchmark bullion coin, the Azadi, sank 1.33 percent to 9,375,000 rials, its lowest since Nov. 26.
Azadi’s fall was helped by gold’s grim day in global markets, as it hovered near its lowest in over three months, hurt by consecutive losses in the last seven sessions as a robust dollar and expectations of higher US interest rates curbed appetite for the metal.
Bullion for immediate delivery was down 0.74 percent to $1,153.29 an ounce by 14:14 GMT, after dropping four percent in the seven sessions to Tuesday. Gold is at its lowest since Dec. 1.
The rail rose versus all major currencies and gold for the second day in a row, while stocks had their best day since Jan. 31, rising 0.34 percent, with petrochemical companies leading the Tehran stock exchange’s rebound from a 17-month low.
Unified Foreign Exchange
The fall in the dollar is good news to the central bank, as it will make it easier for the bank to unify Iran’s multiple exchange rate system.
Greenback’s official exchange rate was 27,960 rials on Wednesday, a 19 percent gap between the official and market rates. This is the first time their disparity falls below 20 percent since the 2012 currency devaluation.
The Rouhani administration seeks to unify the exchange rate system in an attempt to reduce distortions within the market.
The central bank governor, Valiollah Seif, said on Tuesday that the market will be ready by next year (starting March 21) for unifying the exchange rate regime.
“One of the most important prerequisites to ensure that unifying exchange rates will be sustained is for the banking system to maintain international connections,” he added.
