Iran abandons FX rate effort

Iran formally opened a secondary market for hard currency on Tuesday, abandoning after just three months an effort to dictate a single exchange rate for the rial against the dollar as the threat of US sanctions pressures the Iranian currency.

The new market will cater to small exporters and importers from the private sector, the Tasnim and Fars news agencies reported. Fars said the first transaction exchanged rials for United Arab Emirates dirhams, at a rate equivalent to 75,000 rials to the US dollar.

A central bank official said the secondary market would allow exchange rates to fluctuate freely.

“The price of the foreign currency will be set based on supply and demand,” Mehdi Kasraeipour, the central bank’s director of foreign exchange rules and policies, was quoted as saying on Monday by the IRNA state news agency.

Authorities had announced in early April they were unifying official and free-market rates for the rial in favour of a single rate set by the central bank, and warned that those caught trading the dollar at other rates would face arrest.

The move aimed to halt a plunge in the rial to record lows against the dollar that was fuelled by US President Donald Trump’s decision to withdraw from world powers’ 2015 deal with Iran on its nuclear programme.

Some US sanctions against Iran’s economy are to be reimposed in August and some in November, and the prospect has triggered a panicky flight of ordinary Iranians’ savings into dollars. (RTRS)