Economy, Business And Markets

Top Economic Officials, MPs Meet to Address Forex Swings

Majlis Economic Commission will hold a meeting with top officials to discuss the recent upheavals in the forex market.
Majlis Economic Commission will hold a meeting with top officials to discuss the recent upheavals in the forex market.

The Majlis Economic Commission is to hold a meeting with Economy Minister Ali Tayyebnia and Central Bank of Iran Governor Valiollah Seif to discuss the recent upheavals in the Iranian forex market, which have seen the US dollar gain considerably against the rial, announced the head of the commission.

“Negotiations were held yesterday (Monday) with the CBI governor regarding currency market fluctuations and his explanations were heard but the efforts of the government and the central bank in managing the currency market are inadequate,” Mohammad Reza Pour-Ebrahimi was also quoted as saying by

“Considering that the bill pertaining to the sixth five-year development plan (2016-21) is being reviewed, a joint meeting will also be held with the minister of economy and the CBI chief  about fluctuations in the currency market to help the government manage the tumult in the market efficiently,” he added.

The US dollar’s surprise rally in Iran’s currency market has become a hot button issue in the past couple of weeks, with the greenback breaking the 40,000-rial threshold in Tehran’s market last Wednesday and gaining more ever since.

Pour-Ebrahimi identifies the soaring greenback rate against all major currencies as the major reason for its gain against the rial.

In mid-November, the US dollar rose to its highest since April 2003 against a basket of currencies in global markets, reaching its strongest in a year against the euro. It went past $1.07 per euro for the first time since the start of December 2015.

The head of the commission also attributed the phenomenon in part to the failure of Iranian petrochemical companies in injecting their foreign currency revenues into the market, saying they are usually in favor of keeping their forex assets for paying end-of –the-year dividends in late March.

This plays a part in “disturbing the market balance, a thing that need to be reviewed”, he added.

  Currency Futures

According to Pour-Ebrahimi, the central bank must move swiftly to manage the “artificial demand” in the market considering that the country is weighed down by economic recession and a lack of suitable production rate is visible in various markets.

He noted that increased volatility in the market was further exacerbated by a hike in speculative activities.

“The central bank has created conditions based on which all banks and bureaux de change can trade in the currency market so that the market swings can be partially controlled,” he said.

“But it must be accepted that the central bank should have a more efficient management because it is the entity with the authority to manage the market.”

The commission chief also proposed the establishment of a currency futures market, saying that this will help convert a portion of immediate demand for dollar in the currency market into financial instruments, which is prevalent across the world.

Pour-Ebrahimi noted that such a market has been established in many countries and currency dealings take place through financial instruments.

“Therefore, with the establishment of a currency futures market, the artificial demand in the currency market will be addressed and grounds will be prepared for removing physical transactions from the market by moving toward derivatives markets,” he concluded.