Iran's Central Bank (CBI) plans to intervene heavily in unofficial currency markets in Tehran and Dubai starting next week with the aim of reducing prices from current levels, local Persian language Econews reported on October 2.

The Iranian rial has depreciated approximately 26% against the US dollar over the past two months, with the exchange rate climbing from around IRR930,000 in early August to IRR1,175,000 by October 2, following a succession of negative headlines including the reimposition of new economic sanctions by the EU, Canada, the US and Britain.

According to information received from individuals and brokers connected to the Central Bank and banks, speaking with IntelliNews, the market maker intends to supply foreign currency next week with the goal of achieving a price drop from current levels.

Given recent sharp fluctuations in the unofficial foreign exchange market stemming from temporary excitement, reports indicate the Central Bank has decided to intervene in Tehran's unofficial market and Dubai simultaneously amid speculation about a potential price drop in the unofficial market.

With the rate in the unofficial market approaching the ceiling forecast by market players, a significant price reduction next week would not be far-fetched, according to the report.

CBI governor Mohammad Reza Farzin ruled out any plans to increase official exchange rates, pledging to maintain the preferential rate until the end of the year while keeping foreign currency reserves accessible, Ettelaat newspaper reported on October 2.

Farzin outlined three main pillars of the CBI’s foreign exchange and monetary policies in late-night meetings with forex players, entrepreneurs and media: stabilising exchange rates, opposing unification of rates and increases in official rates, and planning for “economic resilience under difficult conditions”.

Speaking at a meeting in the Western city of Tabriz, Farzin rejected rumours about exchange rate unification. "We have no plan to increase the IRR700,000 exchange centre rate or eliminate the IRR285,000 preferential rate," he said.

He said the policy aims to prevent inflation transmission to goods and services, noting past experience has shown any increase in these rates causes sharp jumps in basic commodity prices.

"Unofficial market conditions are mostly affected by inflationary expectations, and with reduced expectations, rates will also decline," Farzin said.

He assured businesses that the Central Bank's foreign currency and gold resources inside and outside the country are accessible.

The governor reiterated that the IRR285,000 preferential exchange rate will not change until the end of the current year, and the exchange centre rate will also be maintained in the range of IRR700,000, with daily fluctuations proportional to macroeconomic conditions.

The CBI has an uphill struggle with gold prices on international markets hitting historic highs which pushes up the overall forex market in the country despite the efforts of the CBI to pump the market with cash.

Global gold prices hovered near their record high on October 2, driven by expectations of further US Federal Reserve interest rate cuts this year and political uncertainty, Ecoiran reported.

Spot gold rose 0.1% to $3,870 per ounce by 12:00 Iranian time, according to Reuters. Gold reached a record high of $3,895 per ounce on October 1. US gold futures for December delivery stood unchanged at $3,896.

Matt Simpson, senior analyst at City Index, said ADP employment data ahead of the non-farm payroll report strengthened forecasts about Federal Reserve rate cuts and expectations of continued dollar index weakening. "

Also with the US government shutdown, gold has experienced another rise," Simpson said.