Iran central bank signals no big rial appreciation after nuclear deal

The rial, which suffered under the sanctions, has edged up to around 32,450 against the U.S. dollar in the free market (File photo: AFP)

Iran’s central bank governor indicated on Wednesday that Tehran was keen to dampen any rise in the rial due to optimism over the lifting of economic sanctions after its nuclear deal with world powers.

The rial, which suffered under the sanctions, has edged up to around 32,450 against the U.S. dollar in the free market after Tuesday’s nuclear agreement from 32,550 at the end of last week, according to Iranian foreign exchange websites.

Growing optimism about the post-deal economy could prompt Iranians to change back into rials billions of dollars that they converted into hard currencies and gold, putting upward pressure on the currency’s value and eventually hurting Iranian exports.

“We saw a slight drop in the dollar price after the nuclear deal, but this won’t continue in the long run,” central bank governor Valiollah Seif told reporters after a cabinet meeting, according to the Iranian Labour News Agency ILNA.

Iran currently operates two exchange rates, the free market rate and an official rate used for some state transactions, which is now at 29,499.

In recent months, the central bank has been raising the official rate gradually to shrink the gap between the two. It has said it wants to eliminate the difference entirely, to make the economy more efficient by putting private firms on an equal footing with state institutions.

Seif said on Wednesday that the central bank would need five to six months after the nuclear deal was implemented to unify the exchange rate. “Preparations have already started,” he said.

The nuclear agreement will be implemented once the International Atomic Energy Agency has verified that Iran is keeping to its side of the bargain.

That may happen around the end of this year, giving Iran access to over $100 billion of assets frozen abroad by the sanctions, according to U.S. officials.

“Implementation of a single forex rate is easier for the government when it has enough foreign exchange reserves, so that a market shockwave will not stop the policy,” government spokesman Mohammad Baqer Nobakht said on Wednesday.

 

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Last Update: Wednesday, 20 May 2020 KSA 12:04 - GMT 09:04
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