Economy, Business And Markets

Fresh Call for Single Currency Rate

Fresh Call for Single Currency RateFresh Call for Single Currency Rate

Foreign exchange derivatives market could help boost confidence among businesses, a senior banking official said.

Correcting the name “foreign currency bourse” to “foreign currency derivatives market”, Abdol-Naser Hemmati, head of the Coordination Council of Public Sector banks said “A foreign currency derivatives market is what is intended to be launched not a currency bourse.”

Foreign currency derivatives markets carry risks arising from swings in forex rates as they go up and down which is the very nature of “fluctuation”. But since hard currency rates in Iran mostly go up, it cannot be called “fluctuation” and thus the derivatives market cannot function effectively, Hemmati told the news website Khabar Online. “That is why in the absence of a unified exchange rate system, launching a forex derivatives market would be an exercise in futility,” he noted.

The official argued that “A unified foreign currency rate mechanism is the platform on which businesses plan and purchase foreign currency securities through futures or options and cover possible risks arising from fluctuations in forex rates.”

In mid-December the Central Bank of Iran approved the launch of a foreign exchange derivatives market within the framework of a plan that was developed under the supervision of Securities and Exchange Organization.