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Iran’s Currency Has Tumbled to a Record Low. It’s Probably Because of Donald Trump

Updated: Dec 26, 2016 12:07 PM Central

Iran's rial hit a record low against the U.S. dollar on Monday in a sign of concern about the country's ability to attract foreign money after U.S. president-elect Donald Trump takes office.

The rial was quoted in the free market at 41,500 to the dollar, weakening from around 41,250 on Sunday and 35,570 in mid-September. Before this month, the record low was about 40,000, hit in late 2012, traders said.

Economists said there were several reasons for the slide, including the dollar's strength against many currencies in the last few weeks, and uncertainty before next year's presidential elections in Iran.

But they said Trump's election in November was a major factor. He has said he will scrap the deal between Iran and world powers that imposed curbs on Tehran's nuclear projects and lifted sanctions on the Iranian economy in January this year.

This would hinder Tehran's efforts to attract tens of billions of dollars of foreign funds to help modernize its economy. Inflows since January have been smaller than the government expected, partly because big international banks fear running into U.S. legal trouble if they deal with Iran.

Many analysts think Washington will stop short of abolishing the deal, but it may apply remaining sanctions on Tehran more stringently. At the very least, uncertainty over Washington's intentions could make companies around the world more cautious about trading with or investing in Iran.

"The inflow of foreign currency to the country is not as much as the government expected after the nuclear deal," Bijan Bidabad, an Iranian economist, told Reuters in a telephone interview from Tehran.

At the same time, pro-growth policies in Iran have boosted money supply. "This has changed the proportion between the local currency and foreign currency, increasing the exchange rate."

Iranian officials have denied any link between the U.S. election result and the rial's slide. Samad Karimi, head of the exports department at the central bank, blamed the slide on a temporary surge in demand for dollars for travel and trade at the end of the year, state news agency IRNA reported.

Government spokesman Mohammad Baqer Nobakht said on Monday that the rial's drop was due to "psychological issues" and that the government hoped it would rebound within days.

Nevertheless, traders at some exchange houses in Tehran told Reuters they had not seen a sudden rise of dollar demand in recent weeks - suggesting the reasons for the rial's tumble might be deep-seated.

If it continues, the rial's weakness could become a political issue ahead of next year's Iranian elections by threatening some of the economic achievements of President Hassan Rouhani, who took power in 2013.

Rouhani's administration stabilised the currency after years of volatility, which helped bring inflation down to single-digit rates from above 40 percent.

Besides the free market exchange rate, Iran uses an official rate, now at 32,317, for some state transactions. The widening gap between the official and free rates has sucked hard currency out of the formal banking system; in an effort to counteract this, the government authorized some banks on Saturday to trade at free rates.

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Screwball ........................................

 

Announced CEO (Tawanar) of the Ministry of Energy of Iran, to stop exporting electricity to Iraq was due to end of the legal duration of the contract and that the company sent a team to Baghdad to discuss a new contract.
He pointed arches Kurds in a press statement, that the contract to export electricity to Iraq has lapsed, while requiring a contract extension to make updates and drafting new amendments and additions.
He added that the drafting of the new contract should take into account the immediate circumstances and the changing exchange rate and the rest of the core issues.
And the Chief Executive Officer (Tawanar), the company notified the Iraqi side since the period of the imminent expiration of the contract for the supply of electricity and the need to update it, pointing out that he was dispatching aides managers of the company and the rest of the institutions concerned to Iraq in order to discuss this issue.
In response to a query about that one reason to stop exporting electricity back to overcome Iraq's debt and one billion dollars level, declined Kurds to speak in detail, but emphasized that sustained cooperation with the Iraqi side and that the Iranian delegation will discuss the subject of payments with Baghdad mechanism, stressing that the process stop supply came after the expiry of the legal period of the contract.
And about the possibility of raising the size of the export of electricity to Iraq, among Kurds that the electricity network in Iraq does not absorb the increase as well as the inability to raise export Iran in the summer season on the background of the need to bridge the internal needs.
He pointed out that the size of the export of electricity to Iraq changes depending on the week, but the average is between 700 - 1000 MW.
The Executive Director expressed the hope that the export process will resume in less than a month.
It is noteworthy that Iran halted electricity exports to Iraq starting Monday.
 
 
 

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The third consecutive day of darkness continues in more than 20 southern and central Iraqi city, after cutting Iran supplying five electricity to Iraq lines due to non-payment of Baghdad imported electricity dues from there, while officials in the government asserts, that there is a financially corrupt political agendas behind the continuing situation Iraq captivated the Iranian electricity.

 
A source said in a press statement, said that more than 20 cities in Basra, Wasit, architecture, Dhi Qar, Babylon, as well as the capital affected by the cut off Iran's power, where energy-processing rates for homes dropped from 12 hours a day to less than 5 hours in those cities.

 
He described Iran cut electricity without warning or reject a proposed installment debt of $ billion, the amount of the payments that, 'fear of Tehran or her dependency'.


Iraq imports more than 1,200 megawatts of electricity per day across five lines, the proportion accounted for less than 5% of what Iraq needs a day to provide its citizens with electricity, where Iraq needs per day to 28 thousand MW.


Iraq imports electricity from Turkey and also generate electricity ships anchored in the waters of the Arabian Gulf near Basra, Baghdad time, which failed to provide electricity for its citizens in spite of spending $ 41 billion over the past ten years for such purpose.


((((((((((He added, Baghdad, on Tuesday began negotiations with Iran in order to resume power it temporarily until agreement on a new pay formula, but the officials in the Ministry of Electricity Iran refused and demanded to settle the full overdue debt and sign a new contract to buy electricity at high prices.))))))))))


However Iran stop providing electricity to Iraq, once again opening the electricity file corruption in the country.

 

He added that the drafting of the new contract should take into account the immediate circumstances and the changing exchange rate and the rest of the core issues.....

He added, Baghdad, on Tuesday began negotiations with Iran in order to resume power it temporarily until agreement on a new pay formula, but the officials in the Ministry of Electricity Iran refused and demanded to settle the full overdue debt and sign a new contract to buy electricity at high prices............................Whos exchange rate ??? Iraq's or Iran's ???

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7 | Time: 20:33|
 

Nematzadeh: Trade in Lira, Rials to strengthen Iranian, Turkish currencies

Ankara, Jan 4, IRNA - Minster of Industries, Mines and Trade Mohammad-Reza Nematzadeh said on Wednesday that trade in Lira of Turkey and Iranian Rial will boost both sides' national currencies.

 
82374805-71302602.jpg

In an exclusive interview with IRNA, Nematzadeh said Turkey has offered trade deal in Lira of Turkey and Rials of Iran, which can help increase level of trade exchanges between the two countries.  
Following serious fluctuations in foreign currencies in Turkey and fall of Turkey's Lira, the country's president invited people to support their national money and said Russia, Iran and China have decided to exchange trade with their national currencies and have taken very good measures to that end.  
The Iranian and Turkish central banks should mull the issue, he said. 
On change of trade balance between Iran and Turkey to the benefit of Turkey, he said the figures indicate that ignoring oil and gas the trade balance will be to the benefit of Turkey but with regards to oil and gas in the transactions, the trade balance will be to the benefit of Iran.
Iran and Turkey have agreed to increase volume of their trade exchanges, he said.

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Ajoint bank between Iran and Pakistan will be established and become operational before the current fiscal year is out, announced Iran’s ambassador to the South Asian country.

“Considering a round of preliminary negotiations between the two countries, the joint bank between Tehran and Islamabad will become operational before Norouz [the Iranian New Year],” Mehdi Honardoust also said in a talk with Fars News Agency in the Pakistani capital city.

Noting that Iran intends to increase trade deals between the two countries, he referred to President Hassan Rouhani’s trip to Islamabad, saying the two sides agreed on some points during that visit.

“We had plans to increase trade between the two countries to $5 billion but the current volume of trade is even lower that what it is between the two countries and Afghanistan,” he added.

President Rouhani travelled to Islamabad in March 2016 at the invitation of Prime Minister Nawaz Sharif to hold high-level talks with special emphasis on regional issues and strengthening economic ties following the lifting of sanctions as a result of Iran’s nuclear accord with world powers.

Sharif said Iran and Pakistan aim to increase their annual bilateral trade to $5 billion by 2021.

“In the five-year strategic action plan signed yesterday, we have aimed at boosting our bilateral trade to the level of $5 billion by 2021,” he said.

According to Iran’s ambassador to Pakistan, Tehran and Islamabad currently have $80 million worth of bilateral deals “which is very meager”.

The official added that Iran wishes to expand and develop ties with Pakistan in many sectors, including agriculture, media and trade.

Honardoust said the two countries have historical and cultural ties, which is why a link between their peoples would also be very important.

“We are also trying to provide more loans for Pakistani pilgrims visiting Iran,” he concluded.

 

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Tejarat Bank’s chief executive has called for Iranian banks and payment service providers to prepare the grounds for using Bitcoin in the country.

Speaking at a meeting on crypto-currencies, Mohammad Ibrahim Moqaddam noted that embracing new technologies would help promote the financial sector, as “hesitation is not the proper response”, Banker.ir reported on Wednesday.

Bankers had similar concerns in the past before using innovative technologies that are commonly used now, he added.

Moqaddam noted that the development of efficient tools for supervising online transactions would help prevent criminal behavior, adding that by taking such measures Iranian businesses would access modern financial services.

Currently, Iran has no specific regulation on crypto-currencies. However, a number of online exchange websites (licensed by e-commerce sector’s regulatory body) buy and sell Bitcoin.

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5 hours ago, screwball said:

Iraqs I would say....

I lean towards Iran's because their the ones under preasure by a strong dollar . And how can they negotiate a contract based on a unseen changing currency that they have no knowledge or control over the exchange rate . Within The Central Bank of Iraq ??? We shall see . But it looks like somebody is about to change soon . Iraq needs electricity for their reforms

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3 hours ago, screwball said:
7 | Time: 20:33|
 

Nematzadeh: Trade in Lira, Rials to strengthen Iranian, Turkish currencies

Ankara, Jan 4, IRNA - Minster of Industries, Mines and Trade Mohammad-Reza Nematzadeh said on Wednesday that trade in Lira of Turkey and Iranian Rial will boost both sides' national currencies.

 
82374805-71302602.jpg

In an exclusive interview with IRNA, Nematzadeh said Turkey has offered trade deal in Lira of Turkey and Rials of Iran, which can help increase level of trade exchanges between the two countries.  
Following serious fluctuations in foreign currencies in Turkey and fall of Turkey's Lira, the country's president invited people to support their national money and said Russia, Iran and China have decided to exchange trade with their national currencies and have taken very good measures to that end.  
The Iranian and Turkish central banks should mull the issue, he said. 
On change of trade balance between Iran and Turkey to the benefit of Turkey, he said the figures indicate that ignoring oil and gas the trade balance will be to the benefit of Turkey but with regards to oil and gas in the transactions, the trade balance will be to the benefit of Iran.
Iran and Turkey have agreed to increase volume of their trade exchanges, he said.

1 Turkish Lira = 9085.40 Iran rials

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3 hours ago, blueskyline said:

I lean towards Iran's because their the ones under preasure by a strong dollar . And how can they negotiate a contract based on a unseen changing currency that they have no knowledge or control over the exchange rate . Within The Central Bank of Iraq ??? We shall see . But it looks like somebody is about to change soon . Iraq needs electricity for their reforms

True.....valid points

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5/1/2017 0:00 

Capitals / Reuters 
revealed four sources familiar with all the biggest oil trader in the world , "Vitol" entered into an agreement with the National Iranian Oil Company to lend the equivalent of $ billion euros to guarantee exports of refined products in the future. The agreement pre - funding is the first big contract of its kind to be signed between Iran and trading company since the lifting of the sanctions that were imposed on Tehran in early 2016. The two companies declined to comment. 
The agreement sheds light on the speed of the recovery of the oil sector in Iran one year after the lifting of sanctions which would allow Tehran to regain market share from rival Saudi Arabia. 
The founding of a new some old agreements with Western companies , as Tehran does not only benefit from the lifting of sanctions , which were imposed by the European Union it but also to reduce the restrictions that the United States imposed on Tehran and limit their ability to obtain revenues in hard currency it needs to revive its economy. 
The foreign companies still tread cautiously for fear of busting a huge number of complex laws at a time when back big oil companies such as Shell, BP and Eni slowly as buyers habitual crude. 
Traders resorted increasingly to pre-funding in recent years to ensure long - term access to huge volumes of oil and oil products. For example helped pre - funding system with major companies such as "Vitol" Iraq 's Kurdistan region 's economy to continue during the war to organize "Daesh" terrorist during the last two years. 
Vitol was to sign an agreement with Iran in October and will come into force this month, said a source in Tehran. The source said " the loan in euros ... and an interest rate of about eight percent compared to petroleum products , " he said , adding that some products may be supplied from the private sector instead of the National Iranian Oil Company.
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On 2016-12-20 at 3:03 PM, tigergorzow said:

SB, Please elaborate on your comment in regards to information mentioned above.   Are we are very close to an increase in the Rial or delete the zeros or introduce the Toman?  Truly appreciate your input

 

Wow lots of great news coming out lately !! We must be close .

pp

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On 2016-12-27 at 5:30 AM, gixxerfrog said:

Hey pp,  just curious if u have heard anything else from ur friend over there?  It's been awhile so I was wondering if (s)he figured whats going on yet with the rename and them talking about the zero(s). I think we get the best info from ppl on the ground. That's y I like that Adam has contacts over there. Hoping ur friend can find some news or figure out what all this means. 

Just got back frog. Not sure if they are back from holidays, but I will check and report back.

pp

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On 2016-12-27 at 6:38 PM, blueskyline said:

Screwball if I might add something to your question . You posted this 2 days ago......

The greenback's rate reached 41,000 rials on Sunday, recording a new all-time high.

Subsequently, Governor of Central Bank of Iran Valiollah Seif said banks should reclaim their “historic and fundamental” role in the foreign exchange market......................

 

 

In a statement on Saturday, CBI informed businesses to approach the banking system for purchasing foreign exchange, noting that banks have been permitted to trade foreign currencies at the market rate since July..................................................

The move was aimed at helping the central bank implement its plans for unification of foreign exchange rates by the end of the Iranian fiscal year.

((((((((But the new call comes after continued growth in the US dollar's exchange rate against the rial in recent weeks.))))).Looks like there are calls to combine the dual exchange rates in the coming weeks instead of March 20. The End of the Iranian fiscal year  ???

 

 

 

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Good, I just to to go some place warm !!! I don't care for snow much anymore.

pp

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On 2016-12-28 at 0:05 PM, markb57 said:

I am hopeful this is done before 1/20 because I believe Trump will lock down Iran tighter than it was before. we will see....

That has played on my mind as well Mark, but Trump is an astute business man. I think he will wait and watch how things go for a bit. You can bet he will have them under a microscope, bu I sense this could very well be done by then.

pp

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We shall see PP. there was a adjustment from 41,500 back down to 39,000. So they did make good on the announcement of a Dollar drop after New Years Eve . Although the rial did go back up 400 rials on Monday or Tuesday . Iran is under a lot of preassure and Iraq sure is releasing a lot of articles of a change to the exchange rate. We continue to wait but hopefully not entirely too much longer . But if its in March ? Okay ....

 

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On 2016-12-31 at 8:33 PM, screwball said:

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.

offcourse you won't talk about it? Becuase it will cause speculation! " predicting"? Lol

Well that is what we did, lol. I have all I need. Even at a penny I will be giggling, but while I just can't see a buck, I do believe .30-.40 is very possible.

Just saying, pp  :)

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On 2016-12-31 at 8:45 PM, markb57 said:

ah hang around SB. It's just getting interesting....the lop thing is paranoia from the dinar. seriously, it makes you wonder how these folks function in the ME and how they will be able to keep up in the global scheme of things. they seem so fragmented at times.

I agree, but that being said I do believe climber7 and frog can voice thier opinion or concern. It was the same when I first got in, Jax voiced his concern about Iran in a respectful manner. I listened but forged ahead anyways as I have a gut feeling it's gonna pop, and real quick like. !!

pp

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On 2017-01-01 at 6:08 AM, gregp said:

Combined aircraft purchases....

$1,715,928,000,000,000.00 QUADRILLION RIAL

Wow...

That's a lot of chinga all right. Question ? How can they possibly make deals on items when there currency is all over the map ? SB, you run across anything that says how they plan to approach that issue ?

pp

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On 2017-01-01 at 8:28 PM, screwball said:

 

It is planned to remove zeros off currency and make the rial value real," Iran's government website quoted Ahmadinejad as saying. "The value of rial, under the law, is calculated on the basis of the price of gold. For some reason, the rial has been devaluated and we have to return its value to the one existing in the law."

Then pull the trigger dang it !! I can handle it being pegged to gold !

pp

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21 hours ago, blueskyline said:

I lean towards Iran's because their the ones under preasure by a strong dollar . And how can they negotiate a contract based on a unseen changing currency that they have no knowledge or control over the exchange rate . Within The Central Bank of Iraq ??? We shall see . But it looks like somebody is about to change soon . Iraq needs electricity for their reforms

LOL, guess I should of read entire thread first before posting, but yes blue I tend to agree.

pp

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A real solution to upholding national currency's value

A real solution to upholding national currency's value

By Mousa Ghaninejad

Following the wild fluctuations in Iran's forex market over the past few weeks, it has become a preoccupation for economists and those interested in economic issues to seek ways to boost the value of the national currency.

Many — including the layman and knowledgeable people, the latter for its benefits — still compute the value of the national currency in terms of  its parity rate against foreign exchanges; whereas, it has a different concept.

The concept is independent of the parity rate and has greater priority. It can be very misleading to use the rates of major foreign exchanges as a criterion for estimating the value of the national currency.

During 2005-2011, the general price index of consumer products and services rose from 40 units to 100 units indicating a 2.5-fold growth. The change showed that the purchasing power of 1,000 toman in 2011 equaled that of 400 toman in 2005. This is while, the rial's parity rate against the US dollar did not change during the same time-span. In case this parity rate had been used for calculating the value of Iran's currency, it should have been acknowledged that the value of the rial had not been subject to a noticeable change over the period, which does not hold true given the realities of national economy.

The truth is inflation brings people's purchasing power as well as the value of the national currency down. This also holds true in the case of the purchasing power for 1,000 toman in 2011 when changed into the dollar, it had more or less the same purchasing power as that of 2005. Nonetheless, this almost unchanged purchasing power was due to the subsidies paid out by the government to those who demanded foreign currencies given the high oil revenues. In fact, the money used for paying the subsidies on foreign exchanges were spent from the pocket of all the people of Iran, irrespective of whether they were interested in purchasing it or not.

This wrong policy strongly encouraged imports at the expense of domestic production and caused the delusion that the government had managed to maintain the value of the national currency.

The truth is that curbing inflation and raising domestic production are the sole factors contributing to maintaining a currency's purchasing power.

The Rouhani administration has made great achievements to this end over the past three years, managing to control the massive inflation the country was struggling with at the beginning of the 10-year period to 2021.

However, the 11th government's achievements — the persistence of which is an indication of success in affording true protection for the value of the national currency — is menaced by two serious threats:

1. The first is the unrestricted growth in liquidity due to the pressure to use the resources of the Central Bank of Iran. 2. The temptation to keep the parity rate of foreign currencies down using oil revenues.

The antidotes to the first menace are carrying out stringent reforms in domestic banking system, adopting disciplined and effective monetary policies and expanding the debt market systematically and rapidly. The Iranian government will have to, once for all, do away with the readily available policy of channeling funds into the national economy using cheap money which has caused a chronic two-digit inflation for the past four decades.

The second serious threat to the government's achievement in curbing inflation pertains to certain short-term political expediencies. Over the past few days, state officials have, apparently, been determined to bring forex rates, which had witnessed a remarkable increase, down to where they were. This policy is only possible through using oil exports revenues but the outcome of this would be an unreal and temporary rise in the value of the national currency. As experienced frequently before, this will lead to dire consequences for the country's economic function.

True that achieving stability in the forex market is absolutely crucial to restoring safety and tranquility to business atmosphere; but this stability is required to be achieved in proportion to the realities of Iran's economy.

To maintain the value of the national currency, forex policies are required to make foreign currency rates stable and in proportion to the realities of the domestic economy to prevent wild and destructive fluctuations in the country's business market. Such a policy will also protect the domestic economy from Dutch disease, uphold domestic production, prepare the ground for inflow of foreign funds and ensure stability in the Iran's macroeconomy.

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Minister: Trade in Lira, Rials to boost Iran, Turkey ties

Minister: Trade in Lira, Rials to boost Iran, Turkey ties

Minster of Industries, Mines and Trade Mohammad-Reza Nematzadeh said on Wednesday that trade in Lira of Turkey and Iranian Rial will boost both sides' national currencies and ties.

In an exclusive interview with IRNA, Nematzadeh said Turkey has offered trade deal in Lira of Turkey and Rials of Iran, which can help increase level of trade exchanges between the two countries, IRNA said.
Following serious fluctuations in foreign currencies in Turkey and fall of Turkey's Lira, the country's president invited people to support their national money and said Russia, Iran and China have decided to exchange trade with their national currencies and have taken very good measures to that end.
The Iranian and Turkish central banks should mull the issue, he said.
On change of trade balance between Iran and Turkey to the benefit of Turkey, he said the figures indicate that ignoring oil and gas the trade balance will be to the benefit of Turkey but with regards to oil and gas in the transactions, the trade balance will be to the benefit of Iran.
Iran and Turkey have agreed to increase volume of their trade exchanges, he said.

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