By Dalga Khatinoglu
As the current Iranian fiscal year is coming to a close and domestic needs for the U.S. dollar is at its peak point, the country's currency and Tehran Stock Exchange indexes was strengthening until March16, but plunged again on Tuesday.
Each USD sold below 33,000 rials March 16, about 3,000 rials less than last month. However, the rial dropped in value by 2.6 percent on Tuesday again.
Rial strengthening against the dollar was quite an unexpected situation because on Iranian New Year's Eve millions travel abroad, mostly to Turkey to mark the Nowruz holidays.
The Iranian government might have ordered the Central Bank to issue a lot of USD to domestic markets, however Tehran Stock Exchange main index (TEPIX) which was around 64,000 point last month, rose to 65,000 points yesterday, but plunged again by 5.51 percent to 61,500 on March 17.
The TEPIX plunged today after reinstituting shares of refineries and petrochemical plants in Stock Exchange after a year. These companies share 10 percent of the stock market.
Coming to currency market, any concrete reason has not been announced yet, but during last month, more positive signals were received from the ongoing nuclear talks between Iran and P5+1.
Promising developments in the nuclear talks between Iran and P5+1 has likely raised expectations for stability in the currency market. The recent good news released by both sides of the talks has increased hopes that sanctions on Iran will be lifted paving the way for stabilizing the currency market.
The decline in oil prices and decrease in the value of the euro are also referred to by the experts as another reason behind the trend.
According to the OPEC's monthly report, published March 16, the OPEC Reference Basket averaged $54.06/b in February, representing a gain of $9.68 or nearly 22% amid a pickup in prompt demand from Europe and Asia and optimism that oil prices may have reached bottom.
This price level had continued until last week, but in recent days the OPEC oil basket price decreased again. OPEC crude was sold at $49.46 on March 16, according to the cartel's official website.
The third reason behind strengthening of rial against USD in recent weeks might be the declining demand for foreign currencies by major buyers. Reports say most of major buyers of currencies, like traders are waiting to see the results of the nuclear talks before buying further currencies. They hope a nuclear agreement between Iran and world powers would decrease the foreign currencies' values.
Edited by CN
Dalga Khatinoglu is an expert on Iran's energy sector, head of Trend Agency's Iran news service.
Follow him on @dalgakhatinoglu