Economy, Business And Markets

Forex Rates Continue Rally

Forex Rates Continue RallyForex Rates Continue Rally

The US dollar is continuing its post-Trump rally in the Tehran market, further throwing into uncertainty Central Bank of Iran pledge to unify foreign exchange rates by March 2017. The greenback sold for 37,250 rials on Wednesday, up 220 rials compared with previous day’s close. The currency had last week crossed the psychological threshold of 37,000 rials.  The official exchange rate, set by the Central Bank of Iran, was 32,070 on Wednesday almost unchanged from the previous day's close.

The surge in forex rates was not limited to the US dollar as the rial saw notable depreciation against a basket of major currencies on the fifth day of the Iranian trade week.  

Euro was sold for 40,550 rials, up by 1.1% compared with Tuesday’s close. The British Pound traded for 47,250 rials on Wednesday, up by 1.05% or 500 rials. Canadian dollar was priced at 29,500 rials, marking about 3% or 850 rials growth compared to Tuesday's close.

Chinese yuan, Turkish lira, UAE dirham recorded about 2.5% growth and were  sold for 5,620 rials, 11,740 rials, and 10,430 rials respectively.

Russia's ruble marked a surprise 8.3% growth on Wednesday and fetched 650 rials.

The surge has raised concerns s about implementation of Central Bank of Iran’s plans for a single exchange rate regime. CBI Governor Valiollah Seif has pledged to introduce a floating forex regime by the end of the fiscal year in March 2017.

Addressing the issue, Pooya Jabal Ameli, an analyst with the CBI, believes that the increase in global political risks [in recent weeks] has led to the growth in the demand side of the market.

“The market has potential for higher prices. CBI should have unified the rates earlier. The difference between inflation rates inside and outside the country could have been employed for setting rates in the market.”

Iran was forced to revert to the controversial double exchange rate regime after nuclear-related sanctions unleashed turmoil in the forex market in 2011-12 in which the national currency lost almost 70% of its value within days.

 “For now the central bank should let rates rise (naturally), until the market stabilizes,” Jabal Ameli said, “The CBI does not have enough resources and the  power to curb and counter speculative activities in the market.”

He says a steady growth in prices is "beneficial for the national economy, especially for exporters and manufactures." However, Jabal Ameli does not deny the fact that letting the rial depreciate further before the presidential elections will not go down well with the public who have bitter memories of the 2011-12 currency crisis.



Add new comment

Read our comment policy before posting your viewpoints