Currency, Gold Prices Surge in Tehran Market Following Trump's Victory

Foreign exchange rates and gold coin prices surged on Wednesday following Donald Trump’s surprise victory in the US presidential election.

US dollar was traded for 36,580 rials in Tehran at midday, marking a notable growth from the previous day’s close of 36,400. The rial is poised to further depreciate against most major currencies well into the coming days.

Trump’s ascendance to the White House came after a sweep of many hard fought swing states in the midwest, southeast, and rust belt, capping one of the biggest upsets in modern American political history.

As the votes rolled in for the billionaire businessman, US stock markets plunged with futures on the Dow Jones Industrial Average falling 506 points, or roughly 4%, as investors began to brace for Trump’s agenda and his anti-free trade views. Those losses were paired when Trump struck a conciliatory tone in accepting Clinton’s concession.

Reports from Tehran’s Ferdowsi Street said some moneychangers had halted the trade of US dollar altogether, mainly due to the wild swings in the market.

High demand for the greenback on Tuesday night is response to elections news also impacted the market, as some moneychangers had run out of hard currencies, according to ISNA.

Peyman Arghavani, an authorized exchange operator in central Tehran, predicted higher rates for the US dollar and other currencies in the coming days.

"US presidential election is the sole major factor causing the rally in the market," he told the Financial Tribune.

Farid Dehdilani, a businessman and market observer believes that “in the short run [the Trump shock victory] will put pressure on the rial, due to unknown and uncertainty that we have plunged into.”

“But eventually its effects will be mitigated and normalcy will return over the medium to long term,” he told the Tribune.

“The possibility that improvement in banking relations with outside world will be undermined,” is a key concern for markets resulting in the rial's decline, according to Dehdilani.

Later on Wednesday, Iranian officials including President Hassan Rouhani and his Foreign Minister Mohammad Javad Zarif, in separate statements, said the US election results will not have any impact on Iran's nuclear deal, and that the US government has an obligation to uphold its commitments enshrined in the landmark nuclear agreement.  

Other Currencies

The exchange rate rally was not limited to the US dollar. The euro also increased by 1%, reaching 40,900 rials on Wednesday, recording a multi-month high.

 British pound was traded at 45,670 rials, up by 0.7% compared with yesterday’s close. Japanese Yen surprisingly registered a 2.86% surge on Wednesday, registering the highest growth among all foreign currencies.

Scarcity of US dollar in the market could be a key factor impacting the prices of other major currencies.

Addressing the issue, Dehdilani said, “We should also note that pressure will build on the USD compared to other currencies because even the Fed will defer its rate hike program until next year.”

Donald Trump's victory in the US presidential race throws into question the core assumption in global financial markets that the Federal Reserve will raise interest rates soon and follow with further gradual hikes over the coming years.

Gold Coins

Iranian gold coins also recorded a significant surge in prices on Wednesday. According to Tehran Gold and Jewelry Union, Bahar Azadi benchmark Gold Coin traded for 11.28 million rials ($354.3), up by 1.62% or 180,000 rials, compared with previous day’s close.

Emami Gold Coins rose by 190,000 rials, or 1.7% to be sold for 11.36 million rials ($356.8).

Half Bahar Azadi Gold Coins and Quarter Bahar Azadi Gold Coins recorded 1.42% and 1.35% surge in prices, respectively.

Mohammad Keshti Arai, head of TGJU, confirmed that gold trade was halted in the market on Wednesday.

“Gold traders will remain cautious, until the market regains stability,” IRNA quoted him as saying.