Dollar retreats in Tehran's market following Iran’s response to Israel

Dollar retreats in Tehran's market following Iran’s response to Israel
/ CC: Khosro Khan
By bne Tehran bureau April 15, 2024

Tehran's Ferdowsi Street's bureaux de change saw a surprise decline in the dollar rate on April 15, following Iran's first direct targeting of Israel two nights earlier. 

Political tensions with Israel have influenced fluctuations in Iran's currency and precious metal markets in recent weeks, with many predicting a freefall if Tehran and Tel Aviv go head-to-head. Still, many in the market expected the dollar price, historically a bellwether, to skyrocket due to tensions - it didn't. Fears of further escalation and potential war between Iran and Israel drove sharp price increases over the past 10-12 days, but following the attack, the tide suddenly turned in Iran's favour.

During Iran's midnight retaliation against Israel, the price of Tether (USDT) set a new record, surpassing the IRR700,000 threshold. However, this increase in value was short-lived, and as daily trading commenced, the dollar failed to sustain its growth and began a corrective trend.

State-affiliated media outlets report a continued decline in the price of the dollar and gold.

According to a report from Tasnim News Agency titled "Economic Stability with Military Display of Power," the dollar is currently being traded at a rate of IRR 640,000. Unofficial websites, such as Bonbast, reporting IRR 653,500 and Navasan at IRR 661,700, indicate higher dollar prices.

The Emirati dirham banknote was traded at IRR 182,000, while the euro also experienced a 2% decline during the day, settling at IRR 706,800.

Analysts speaking with bne IntelliNews attribute the dollar's retreat on the previous day to a decrease in traders' expectations regarding the continuation of hostilities. Traders inferred the likelihood of ongoing military conflict between Iran and Israel had diminished.

In the official market, the exchange rate for each US dollar banknote stood at IRR 435,670 at Iran's Centre of Exchange, affiliated with the Central Bank of Iran. The euro banknote saw a slight decrease to IRR 463,940 at the ICE.

In the coin market, gold and sovereign prices continue to exhibit a downward trend, consistent with previous days. According to the Union of Gold and Jewelry's website, each gold sovereign was sold for IRR 43.6mn, significantly lower than in recent days when prices soared above IRR 45mn.

Vahid Shaghaghi Shahri, in conversation with Khabar Online, stated that the cooling market reactions are largely emotional and temporary, suggesting that a normalisation of prices is on the horizon.

He added: "These types of events typically do not have a long-lasting impact on financial markets, which tend to be resilient."

The economics expert said he anticipates that the emotional effects in the markets will dissipate, allowing prices for commodities like gold, oil, and cryptocurrencies to return to their long-term averages soon.

The expert also highlighted the ongoing rise in the price of gold, which has recently surpassed the $2,350 per ounce mark. Despite the current geopolitical tensions, he does not foresee a decrease in gold prices in the near future, indicating a continued bullish trend for the precious metal.

On the oil front, Shaghaghi Shahri expects short-term prices to fluctuate between $80 and $85 per barrel, supported by global economic growth and increased commodity demand. This projection suggests a stable yet cautious market outlook amidst the ongoing regional disturbances.