The US dollar again crossed the psychological barrier of 34,000 rials on Wednesday. As of 11:45 am GMT on Wednesday it bought 34,650 rials -- 1.94% up from the previous day's close, according to the Association of Gems and Jewelers' website. In Tehran's free market the currency was traded even higher at 34, 900 rials. The euro also rose slightly to be traded at 39,370 rials up .05% from Tuesday's close. Rial later regained some territory at closed at 33,900 rials.
Wednesday marked the second greenback rally that broke the psychological level of 34,000 rials this year (started March 21), which only months ago seemed pretty far-fetched given the positive sentiments in the wake of the nuclear accord signed between Iran and the six world powers on July 14.
Volatility in the foreign exchange market continues as the government struggles to cope with huge oil revenue losses as the Saudis and Russians keep on pumping oil into an already oversupplied global oil market.
There is much speculation that the government is manipulating forex rates to plug its deepening budget deficit. Economy Minister Ali Tayyebnia and officials at the Central Bank of Iran have, however, strongly denied such accusations.
"I think this price surge entirely is to do with state-owned banks pulling the strings," Hussein Tavakkoli, a bureau de change operator in central Tehran says.
"[The government] is the only institution that can cause such fluctuations in the market so that it can sell its own hard currency…As long as the government has an appetite for this, we should expect more fluctuations," he told the Financial Tribune.
Although economic and banking sanctions are yet to be officially removed, the market refuses to budge and has not yet shown any tangible sign of relief. Tehran expects $29 billion in unfrozen and repatriated funds from overseas by next January, when sanctions are expected to become history.
Asadollah Askarowladi, head of Iran-China Chamber of Commerce predicted on Tuesday that the greenback would reach 35,000 rials by the end of the calendar year (March 2016) if sanctions remain in place.
"The growing number of visits by foreign business and industrial delegations to Tehran has had little effect on the greenback exchange rate despite public expectations," he noted, adding that as long as the oil sanctions are in place, no relief for forex rates could be expected.
Self-Regulation for Bureaux de Change
On Tuesday, CBI Governor Valioolah Seif hosted a meeting with members of the Bureaux de Change Union to address problems besetting their trade.
He called on the moneychangers to focus on self-regulation, praising their contribution to restoring calm in the economy and the foreign exchange market, the bank’s official website reported on Tuesday.
"To this end, the regulator’s supervisory arms have strived to ensure a transparent and sound board election for the union so that the officials can enforce self-regulation which is common in similar institutions," he said.
He hoped that the activities of the union together with remarks made by its officials will help build stability in the chaotic forex market. The regulator also expressed it willingness in cooperating more closely with the union to maintain stability in the forex market.
Saeed Mojtahedi, head of the Supervision Council of the union, stressed the group's commitment to cooperate with the CBI in enforcing the regulations and called for the involvement of the bureaus de change in creating the foreign currency bourse.
The CBI revised foreign exchange regulations last August. It lowered the minimum capital requirement for owning a bureau de change to encourage shop owners to register with the bank, while setting a 12-month deadline for the 1,000 unauthorized money changers to apply for an operating permit. However, many technical aspects of the new regulations have come under fire by bureau owners.
Head of the union has sent a letter to the government calling for reform in laws for bureaux de change operation and leniency toward it members. He made the call after the CBI deadline for unauthorized shops for official registration expired last month.
According to available data, currently, there are over 1,400 money changers across Iran, but only 428 are certified and regulated by the CBI.
Nooshin Rahgozar contributed to this report.
