Foreign currencies pushed the rial back down on Monday, after a weak of gains for the Iranian currency.
The rial fell versus all major currencies and gold coins on Monday, as lower foreign exchange prices spurred more buying and nuclear talks optimism lost its glitter.
“The rial was over-bought,” a Ferdowsi Street trader told the Financial Tribune. “Investors are sobering up, and starting to look for more concrete queues out of the ongoing talks.”
The US dollar jumped 2.64 percent to 33,080 rials by 12:34 GMT on Monday, giving a boost to all major currencies. The greenback rebounded from a six month low after five consecutive days of heavy losses in Ferdowsi Street – Iran’s foreign exchange hub.
The euro was the main gainer in Tehran, rocketing off three-year lows. It surged 3.3 percent to 36,000 rials by 12:34 GMT. The European currency which is heading for parity with the greenback in light of the European Central Bank’s 1.1 trillion euro asset-buying program, took a breath on Monday, both in Iran and around the globe.
Sterling halted its advance 50 rials shy of the key 50,000 level in Ferdowsi Street. It rose 2.25 percent to 49,950 rials on Monday, recouping part of the losses it sustained last week. The pound which was knocked down nearly six percent to a 20-month low on Sunday after breaking below the 50,000 rial mark, rebounded on the British currency’s rally in the international markets coupled with a general retreat of the rial against major currencies.
The rial was the hot potato on Monday, as investors hoarded foreign currencies.
Iran’s main trade partners’ currencies were among the major gainers. The Turkish lira jumped 2.72 percent to 13,200 rials by 12:34 GMT on Monday. The Emirati dirham rose 1.57 percent and changed hands at 9,070 rials.
The commotion wasn’t just in the currencies. The rise of the dollar in Ferdowsi Street led to a divergence between bullion’s international price and its coin offshoots in Iran.
Benchmark Azadi gold coin and its sister Emami each advanced 1.43 percent to 9,200,000 rials and 9,250,000 rials respectively by 12:34 GMT on Monday, bolstered by the rial’s weakness. The bullion coins are rebounding from four-month lows.
Azadi which had fallen to four-month lows on optimism about Iran’s talks with the world powers diverged from gold as bullion fell on Monday, trading just above its lowest level in more than three months, due to stronger European shares and expectations that this week’s Federal Reserve meeting could hint at the timing of any hike in US interest rates, Reuters reported.
Spot gold was down 0.4 percent at $1,154.35 an ounce by 12:42 GMT. The metal had fallen for nine consecutive sessions up to Thursday, its longest losing streak since 1973. It hit its lowest level since Dec. 1 on Wednesday at $1,147.10, after strong US jobs data stoked speculation the Fed would increase rates in June.
US gold futures for April delivery were up $1.50 at $1,153.90 an ounce.
Investors were looking at the Fed’s two-day policy meet that begins on Tuesday for clues on how soon it could raise interest rates. Higher rates could dent demand for gold, which does not pay any interest.
Rial’s fall coincided with minor gains in equities. Tehran Stock Exchange’s main index edged up 0.22 percent, reaching 65,122.80 by the session’s close, pushed up by banking shares. Optimism that the six world powers – the US, Britain, France, Germany, China and Russia – and Iran would end a 12-year nuclear dispute by reaching a political agreement before the end of March sent investors running from foreign currencies over the past week.
The nuclear negotiations already reached a temporary deal in November 2013 that was extended twice since. Now the two sides are trying to hammer out a long-term agreement, with speculations that suggest deal may be close.
