Financial Tribune- The unification of Iran’s dual foreign exchange regime and the decline in the exchange rate of major currencies were among the most important topics discussed at Saturday’s meeting between top economic officials and senior lawmakers, as rial continues to gain against the US dollar, announced the chairman of Majlis Economic Commission.
“It was decreed [during the parliamentary meeting] that foreign exchange rates be unified over the long term and the government use the instruments necessary to decrease currency rates in the short term,” Mohammad Reza Pour-Ebrahimi told Fars News Agency.
The official was speaking after a meeting attended by members of the commission, Economy Minister Ali Tayyebnia and Central Bank of Iran Governor Valiollah Seif on Saturday.
The exchange rate of the US dollar had crossed 40,000 rials last week but started showing signs of abating as of Wednesday. The greenback was quoted at 39,500 rials in the free market on Saturday.
The below 40,000-rial rate for $1 would be a major relief for the heated forex market, after it experienced one of its biggest upheavals in recent time.
The meeting was held to discuss these upheavals in the forex market.
A member of the commission, who was present at the meeting, quoted Seif as saying that a substantial amount of foreign currency was injected into the market by CBI to reverse rial’s weakening against the greenback.
“Seif referred to injecting $5.8 billion into the unofficial market as one of the efforts to manage the market, because of which the exchange rate of the dollar [against rial] has decreased,” Seyyed Hassan Hosseini Shahroudi also said in a talk with Tasnim News Agency.
According to Shahroudi, the entry of banking system in foreign exchange trading at the free market rate has also contributed to rial’s rise against the dollar.
Last week, CBI informed businesses to approach the banking system for purchasing foreign currency, noting that banks have been permitted to exchange foreign currencies at the market rate since July.
Single Forex Rate Still in Sight
The central bank governor also spoke to reporters after the meeting, stating that rate unification is necessary for the economy.
“Things have been said on my behalf, but what I actually said was that there needs to be a fulfillment of prerequisites to achieve a full unification of forex rates,” he said.
“One of these prerequisites is suitable [international] banking ties to engage in international transactions.”
Iran operates two exchange rates—a free market rate and an official rate used for state transactions—set by the central bank at around 32,375 rials on Saturday.
In recent months, the central bank has raised the official rate gradually to reduce the gap between the two. It wants to unify the exchange rate, make the economy more efficient and create a level playing field for private firms competing with state institutions with access to cheaper foreign exchange.
The CBI governor added that compared to when Iran’s nuclear accord with world powers was first signed in June last year, the country has moved forward and positive results have been achieved, which have partially paved the way for adopting a single exchange rate.
Seif reassured that the matter “will be followed up”, reports ICANA.
On the state of currency market, the official reiterated that the recent rise in forex rates has been a result of seasonal demand “which had peaked”, but is now moving on a downward trend and will continue to do so.
Seif said the central bank prefers to avoid talking about currency rates as much as possible to make currency speculators incur losses, predicting that this is exactly what will happen.
“The current forex rates in the market are not real and economic variables show circumstances that will lead to a declining trend of [exchange] rates,” he said.
He also elaborated on the central bank’s recent announcement that it will hand a list of people who traded large amounts of foreign exchange in recent weeks to Iran National Tax Administration for further investigation.
Seif noted that the tax administration can now legally obtain information from the central bank to monitor bank accounts involved in large-scale currency trading.
As of now, any account with a high volume of forex transactions will be scrutinized to check whether or not they have submitted their tax returns.