Iran's central bank intervenes in the foreign exchange market to protect the riyal

Iran's central bank intervenes in the foreign exchange market to protect the riyal



Central Bank of Iran
 
09/30/2018

Economy News Baghdad

TEHRAN (Reuters) - Iran authorized the central bank on Saturday to intervene in the foreign exchange market to protect the riyal after the local currency plunged to record levels in recent weeks following the re-imposition of US sanctions on Tehran, state television reported .

The riyal has been eroded by a weak economy, difficulties in local banks and heavy demand for dollars among Iranians, who fear their country's oil exports will contract and the economy is damaged by Washington's withdrawal from a historic nuclear deal in 2015 and the re-imposition of US sanctions.

A series of US sanctions targeting Iran's oil sector are expected to come into effect in November. President Hassan Rowhani described the sanctions as an "economic war" against Tehran.

State television said a top government body headed by Rohani, including parliament and judiciary, "gave the central bank governor the authority necessary to intervene in the foreign exchange market and manage it."

"The central bank will intervene in the foreign exchange market through banks and approved exchange offices and will take the necessary measures to control the exchange rate of foreign exchange," the TRA quoted the agency as saying.

The central bank "will announce the exchange rate in the foreign exchange market in a timely manner."

It was not immediately clear whether Saturday's announcement meant the government would revert to the policy of injecting hard currency into the market, which it had abandoned in recent months.

The Iranian riyal fell to a record low against the dollar on the informal market on Wednesday as Iran's economic situation deteriorated and US sanctions re-imposed.

According to foreign exchange websites, the dollar traded against 186,000 riyals on Wednesday. The riyal has lost about 75 percent of its value since the beginning of 2018.

According to two foreign exchange websites monitoring the unofficial market, Saturday, the first trading day of the week, the riyal recovered some of its losses as the dollar traded against 174.3 thousand and 174.5 thousand riyals.

The official exchange rate is 42,000 riyals per dollar and is usually used to import state-subsidized commodities such as food and medicine.

The supreme government body also gave its final approval to a procedure that allows foreign exchange offices to import foreign exchange papers and requires exporters outside the oil sector to resettle their profits in hard currency within three months in order to reinvest them or sell them in an organized secondary market for importers.

Officials said Iran was moving towards loosening laws regulating the import of foreign currency and gold exchange bureaux after Washington re-imposed sanctions on Iran's purchases of dollars and its trade in gold and precious metals and its dealings in metals, coal and some electronic software.

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