Rial Holds Steady Against USD In Defiance of Expectations

The rial was quoted in the free market at 37,800 to the US dollar in Tehran on Monday, having kept a steady course since the Norouz (Iranian New Year) holidays started on March 21.

Although the USD exchange rate was predicted to leap in the early days of the Iranian New Year as it happened last year, it only crossed 38,000 rials for a short period with rial gaining ground quickly afterward.

The long-held stability in the currency market during much of President Hassan Rouhani's tenure was briefly interrupted in late December when rial hit a record low of 41,500 against the greenback.

Awaiting a surge in greenback exchange rates, currency speculators had bet on rial to reach 38,200 per dollar.

Intervention by some bank-owned exchange houses, selling the US dollar during the Norouz holidays, was the main reason for speculators' presumptions to fall flat.

Two days prior to the holidays on March 19, the rial stood at 37,950 to the dollar and now after the holidays, the rial even gained slightly against the greenback at 0.2%.

In a survey conducted by the Persian economic daily, Donya-e-Eqtesad–a sister publication of Financial Tribune– 66 economists and academics expressed their forecasts on economic indicators such as inflation rate, GDP growth and foreign exchange rate for the current year.

Asked to estimate the USD exchange rate against the rial by the end of the year on March 20, 2018, 75% of them put the figure between 39,000 and 45,000 rials while the rest predicted the rate to stand around 45,000 to 50,000 rials.

As for the inflation rate, more than half the economists put it somewhere between 10-12% and about 33% of them predicted it to exceed 12%.

In 2016, Iran’s inflation rate eased into single digits for the first time in a quarter century following the lifting of sanctions against Tehran after the implementation of a landmark nuclear agreement, officially known as the Joint Comprehensive Plan of Action, in January.

Bahar Azadi Gold Coin also experienced steady days. The market closed at the end of the previous year with the price of benchmark coin standing at 12.15 million rials ($324).  

The price hovered around 12 million rials ($320) during the holidays and fetched 12.05 million rials ($322) on April 3 in Tehran's market to register a 0.62% decrease compared with the rate just before the holidays.

Lackluster demand for the precious metal during the second week of the new Iranian year was the main factor behind the bearish market. This is while the global price of gold went up from $1,234.8 on March 20 to $1,250 two weeks later, marking a 1.2% increase.

The head of Tehran Gold and Jewelry Union also ascribed the fall in gold coin price to weak demand.

"The gold rally in global markets impacted our market and prevented the [further] decline in gold coin price. However, the price is in tandem with foreign exchange rates and the global price of gold," Mohammad Keshti-Arai was also quoted as saying by ISNA.