Forex and Gold Jump | Financial forum
Foreign currencies have continued to gain against the rial during the six-day lockdown of Tehran’s unofficial market as geopolitical risks loom and uncertainty mounts in the region and beyond.
On Saturday, the dollar broke through the resistance of 270,000 rials and was traded at 273,000 rials, gaining 4,000 rials, or more than 1.5%.
The upsurge came in the absence of key players in the regulation of the currency market, namely the official exchange bureaus affiliated with the Central Bank of Iran due to the lockdown announced by the government on Monday to contain the new wave of Covid-19 which has further reduced over 100,000 lives.
The euro climbed 0.7% or 2,000 rials to 319,300 rials while the British pound closed unchanged at 373,700 rials. The UAE dirham gained more than 3% or 2,400 rials to close at 74,500 rials.
A combination of political factors has fueled volatility in the forex market in recent days. A key factor is political unrest in the eastern neighbor, Afghanistan.
With the Taliban taking control of the war-torn country, exchange rates rose in the city of Herat in northwestern Afghanistan near the border with Iran. This is seen as a signal for the currency market in Tehran, according to the Persian-language business site Eqtesad News.
Rising exchange rates in Afghanistan’s border towns have increased demand in other parts of the country, with traders being encouraged to buy cheaper currencies and sell them at a higher price in border areas.
In addition, political unrest in the eastern neighbor has disrupted trade with Iran due to border crossings being closed, the Persian-language business newspaper Donya-e-Eqtesad said.
Another key factor influencing sentiment in the chaotic currency and currency market is the diminishing prospects for resumption of the 2015 Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA). ‘gold.
The newspaper highlighted statements by Robert Malley, the US special envoy to Iran, who said joining the deal “is not something we can fully control.”
In an interview with The Politico on Thursday, Malley linked the delay in reinstating the deal to the mistrust sown during the Donald Trump administration’s “maximum pressure” campaign and Iran’s political transition.
Observers also blame the turmoil in the forex market and rising prices for the lack of meaningful intervention from the Central Bank of Iran as the CBI waits for a new official to be appointed by President Ebrahim Raisi. The transition process has apparently undermined the influence of the CBI to intervene in the foreign exchange market as in the past.
As expected, the recovery in the currency market stimulated an upward trend in the domestic gold market. An Emami gold coin was sold for 121.5 million rials on Saturday, said Mohammad Kashti-Aray, vice president of the Tehran Gold and Jewelry Union. The popular coin was 3.2 million rials, 2.6% more than the price before Monday’s lockdown.
Half of Bahar Azadi bought 61 million rials, up 1.5 million rials from the previous session and one gram of 18 karat gold jumped to 11.6 million rials.
In the international market, gold edged up on Friday, helped by concerns about a spike in Covid-19 cases that could cloud the global economic outlook, but gains were capped as it had to compete with the dollar to attract investors looking for safe haven assets, Reuters reported.
Spot gold rose 0.2% to $ 1,783.97 an ounce and about 0.3% on the week and US gold futures rose 0.2% to $ 1,785.70.