Take Higher Forex Rates in Stride

A 10-12% annual increase in foreign exchange rates based on the inflation rate is not an anomaly, says a economist.

“Those who insist that currency rates must stay fixed should (also) keep inflation on a leash and prevent it from rising so that exports are not harmed, imports do not increase and the balance in consumption pattern is not upset,” Saeed Leylaz told IRNA.

As an example, the academic noted that a trip to Antalya (in neighboring Turkey) is now less costly than a trip to the holy city of Mashhad and it is cheaper to import banana from Ecuador, which is 16,000km away than to import apples from Damavand (a district in north Tehran).

All this is the result of the relative stability in forex rates, the pundit says.

“On this basis, an annual surge of about 10-12% in forex rates cannot and should not be condemned unless inflation has been tamed,” Leylaz said. “An increase in currency rates in the vicinity seen in the market over the past several days is in no way a cause for concern.”

According to the economic expert, there also should be a consistency between the US dollar rate and the inflation rate. “We have indeed witnessed a relative stability regarding the matter (rates) over the past three and a half years (since the current government took office in mid-2013).”