Iran has replaced the US dollar with China’s yuan on its official foreign exchange rate reporting platform, Sanarate.ir, Islamic Republic of Iran Broadcasting reported on August 20.

The move chimes with recent efforts by two other countries hit by US sanctions, Russia and Turkey, to chip away at the role of the dollar as the world’s most tradable currency. Both the Russians and Turks have also dumped some of the their US Treasury bill holdings while Iran and Turkey have both agreed they would like to entirely move to non-dollar transactions in settling import and export billing.

Iran, moreover, is even banned by US sanctions from acquiring dollar banknotes. China, meanwhile, is generally on board with the idea of phasing out the dollar as the predominant settlement currency in bilateral trade and using national currencies where possible.

Rial’s slippery slope
Another consideration is that when in April it became clear that the Trump administration was set to announce the reimposition of heavy US sanctions against Tehran—it actually went on to do so in early May—the Iranian rial (IRR) hit the slippery slope. It has collapsed by more than 50% in the past five months against all the major currencies, with a by now abolished government scheme to forbid unofficial forex trading appearing to accelerate the depreciation rather than slow it as was planned. The dollar has also in recent weeks been on a bull run against other currencies specifically traded on the Iranian markets. That may have been the last straw in triggering the removal of it from Sanarate.ir.

Sanarate.ir is affiliated to the Central Bank of Iran (CBI). It is used to set the average rates of the most tradable currencies including the pound sterling, euro and the United Arab Emirates’ dirham, among others. The yuan is the latest addition to the currency board, following the removal of the dollar.

According to the given rates on August 21, one yuan bought IRR11,650, while the euro and dirham bought IRR91,998 and IRR21,749.

Preference for euro
In 2016, the Rouhani administration required all ministries to stop quoting trade figures in dollars and to use the euro for this activity instead.

It was, however, only by April this year that most ministries had moved ahead with the plan, with officials blaming delays in transferring exchange rates to the euro.

Earlier this August, President Hassan Rouhani unveiled his revised package of policies to strengthen the IRR following the disastrous effects of shutting down the legal but unofficial markets.

The recently-appointed CBI governor, Abdolnasser Hemmati, said during a TV interview this week that the new mechanism to control the dollar rate would rely on what he referred to as a “secondary currency market”.

The package he outlined started to show immediate effects. The all-time low of more than IRR120,000 that the rial posted against the dollar a couple of weeks  back prior to the unveiling of the package has not been seen again. The unofficial rate stood at around 106,000 as August 21 came to an end. That’s an improvement but considering the dollar only bought around IRR35,000 at the start of this year, it’s nothing to celebrate. Mind you, the rial is not alone. Turkey’s lira is down around 40% against the dollar in the year to date, and the Russian ruble has lost around 14%.