CBI Governor: USD Rate to Moderate

Governor of the Central Bank of Iran Valiollah Seif tamped down worries about the surging exchange rate for the US dollar on Tuesday, stressing that the surging exchange rate for the US dollar is bound to "moderate".

The rial had weakened to its all-time low in the past week, reaching 42,000 per dollar before gaining some ground. The dollar's rally had accompanied the gold coin surge, creating an unprecedented bubble in recent history.

"Naturally an exchange rate of 42,500 is not the [real] rate for the currency and in the future we will witness more moderate rates," Seif was quoted as saying by IBENA.

Seif also responded to the controversy of the exchange rate set in the 2018-19 budget law–35,000– which is even lower than the official rate, saying that the figure has only "computational" merit and won't be an authentic reference.

Death Knell for Dollar

The CBI governor, in no uncertain terms, declared that the Islamic Republic has indeed abolished the US dollar in its trade dealings with other countries, making good on a promise to sideline the greenback in response to US sanctions that bar Iran from processing transactions going through America's financial system.

"It’s now definite that the dollar has been eliminated from our trade dealings. After all, the currency does not have much use in our banking system," Seif said, adding that the country now receives its foreign payments in currencies other than the US dollar.

After the removal of most sanctions in January 2016 in the wake of the landmark nuclear deal, the US primary sanctions, including restrictions on the use of greenback, remained in place, prompting Iran to seek alternative ways to join the international payment system.

Given the dominant role of the US currency in global trade, the country signed currency swap agreements with neighboring countries and allies, including Russia and more recently Turkey.

The CBI also reached a preliminary deal with China to reduce the role of US dollar in trade transactions. In 2016, yuan joined the US dollar, euro, yen and British pound in the IMF's special drawing rights basket, which determines currencies that countries can receive as part of IMF loans.

China is Iran's biggest trade partner and de facto leader of the Asian Infrastructure Investment Bank, of which Iran is a founding member.