Economy, Business And Markets

Lausanne Deal Has Little Effect on Currency Market

Lausanne Deal Has Little Effect on Currency Market Lausanne Deal Has Little Effect on Currency Market

Developments in the Iranian currency market in the past days hardly indicate that the recent nuclear agreement has had any effect on the market, an economist argued.

Many Iranians expected the framework agreement between Iran and the world powers last week in Lausanne, Switzerland, to lead to a rise in the rial’s value. Despite the expectations, the deal, which is set to end a 12-year nuclear dispute between Tehran and the West, has not affected the currency market in a serious way.

The Lausanne agreement has paved the way for negotiators from both sides to reach a long-time nuclear deal by June 30, a breakthrough that will terminate all nuclear-related sanctions against Iran.

“The public has learnt that the currency market do not really depend on the nuclear talks’ outcome but on the market’s supply and demand,” Seyed Bahaedin Hosseni Hashemi told Eghtesad News.

Hard foreign currencies arrive in the country from oil sale and non-oil exports or by foreign people who visit Iran, he noted. On the other hand, the revenues in foreign currency are spent on imports and overseas visits by Iranian citizens, he added.  

Market players and even the public know that oil revenues have almost halved in the past few years. They know that improvement of the economic situation will increase demand for foreign currencies to create employment. Therefore, he said, “almost all experts believe that last week’s framework agreement will not result in any tangible development in the currency market in the short run.” However, with a few-months delay, it could have impacts on the market, he argued.

As oil plays an important part in the economy, the falling global prices and the resultant decline in oil exports can lead to budget deficit, increasing the government’s debt to the central bank. “This will lead to a hike in inflation and the loss of the rial’s value; so the impacts will come maybe after the final agreement is signed, in three months or so.”