28east

Politics, religion, and culture where East meets West

Posts Tagged ‘currency

TCMB intervention

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Turkish Lira Rises on Rate Hike
Prabha Natarajan; The Wall Street Journal; Jan. 28th, 2014

Turkey’s currency surged after the country’s central bank aggressively hiked key interest rates, a move that revived confidence in other battered emerging-market assets.

Within minutes of the announcement, the Turkish lira strengthened 3% against the dollar—a big move in foreign-exchange markets. That brings gains in the lira to almost 10% since the currency hit a record low Monday. In recent trade in New York, one dollar bought 2.1867 lira, compared with 2.2522 late Monday, according to data provider CQG.

After an emergency policy meeting Tuesday night, Turkey’s central bank said it is raising its overnight lending rate to 12% from 7.75%.

Written by M. James

January 29, 2014 at 3:45 am

Posted in News, Politics, Turkey

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New troughs

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A bold new low.

Written by M. James

January 27, 2014 at 8:53 am

Posted in News, Politics, Turkey

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Responding to a perceived white flag

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An appropriate follow-up from my last post, which suggested that the sanctions against Iran may have succeeded. The Financial Times reports (here):

The US is ready to hold direct talks with Iran if it is serious about negotiations, Vice-President Joe Biden said on Saturday, backing bilateral contacts that many see as crucial to easing an international dispute over Tehran’s nuclear programme.

The currency war in Iran may have been won, with the result that the eastern Mediterranean is opening to further Turkish influence.

Written by M. James

February 3, 2013 at 11:30 am

Posted in News, Politics, Turkey

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Rial continues to fall

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Just as a reminder, the currency war in Iran continues, in tandem with the ousting of al-Assad. From the San Francisco Chronicle (here):

TEHRAN, Iran (AP) — Iran’s currency hit a record low against the U.S. dollar in street trading, the semiofficial Mehr news agency reported Sunday.

Mehr says the rial dropped nearly 7 percent in a single day, to 24,300 rials to the dollar. Street traders say the rial rose slightly later on Sunday to around 23,900 rials to the dollar.

Written by M. James

September 9, 2012 at 2:51 pm

Posted in News, Politics

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Fixing the rial

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Since March, when I last posted (“Iranian oil empire?”) about the currency war in Iran, things have visibly and significantly cooled. But just because there are no pipeline explosions, naval exercises, or military threats doesn’t mean the situation hasn’t progressed. Let’s start where we left off, with an Iran inconvenienced by sanctions, but essentially unfettered in its oil production and export capabilities—especially in transactions with the BRICS.

Chris Cook, former director of the International Petroleum Exchange, suggests that the sanctions on Iran may not just be ineffective, but counterproductive; and that Iran is actually better off (as March 20th might have suggested) without a market for dollars. Anyone who can foster a good relationship with an off-market Iran will now have incentive to buy discounted crude (relative to global prices) for refining and resale at a profit.

Even more significant is the possible end result of a developing energy voucher system in Iran designed to decrease domestic demand and wasteful energy use.

Taken to its logical conclusion, where this policy leads is for Iran’s Central Bank simply to fix a new rial – with several zeroes removed – to a suitable unit of energy, and for energy prices to be set against this unit. This could be implemented in a similar way that a deficit-based abstract currency unit was fixed to participating European currencies at the launch of the euro.

The transition process would need to be properly and transparently managed by a monetary authority – probably the Central Bank – in close liaison with the oil and gas complex. The outcome of adopting an “energy standard” and an energy dividend in this way would be to rapidly reduce profligate use of energy at the same time as addressing the problem of inflation.

Instead of debasing Iran’s rial entirely, the U.S. may only be encouraging Iran to rethink its currency in new, energy-based terms. If this becomes reality, the Iranian rial would effectively become a hedge against volatile global crude oil prices and dollar-denominated market manipulation. Put simply: If each rial in your reserves guarantees a fixed amount of Iranian oil, free from market volatility, you’re going to buy more rials.

I don’t think that’s what Obama intended.

Written by M. James

April 27, 2012 at 1:16 pm

Iranian rial weakens

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Iran’s Middle Class on Edge as World Presses In
Robert F. Worth; The New York Times; Feb. 6, 2012

TEHRAN — One measure of the profound anxiety now coursing through Iranian society can be seen on Manouchehri Street, a winding lane at the heart of this city where furtive crowds of men gather every day like drug dealers to buy and sell American dollars.

The government has raised the official exchange rate and sent police into the streets to stop the black marketeers, but with confidence in Iran’s own currency, the rial, collapsing by the day, the trade goes on.

In an interview, Ali Akbar Javanfekr, an adviser to Mr. Ahmadinejad, also dismissed the sanctions as counterproductive, saying Iranians had suffered worse isolation during the 1980s and had always found ways around them. “This is not the way to approach us,” Mr. Javanfekr said. “You should instead speak to us with respect. You should win our heart.”

Some Iranian businessmen make similar comments, noting that there are always ingenious new ways to sell oil and to transfer money, and that the people who will suffer most from sanctions are not the ones who can pressure the government for change. “So you kill the pistachio trade in Iran,” one businessman said. “How does that stop nuclear enrichment?”

As I’ve argued already, the sanctions aren’t about stopping nuclear enrichment (or about pushing regime change)—they’re about dollarizing Iran by collapsing the rial. If the above reports are true, this attempt has already been met with some success.

Written by M. James

February 7, 2012 at 7:35 pm

Posted in News, Politics

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The currency war in Iran

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To reinforce my claims in a prior post, here is William Clark on “The Real Reasons Why Iran is the Next Target”—from 2004:

The Iranians are about to commit an ‘offense’ far greater than Saddam Hussein’s conversion to the euro of Iraq’s oil exports in the fall of 2000. Numerous articles have revealed Pentagon planning for operations against Iran as early as 2005. While the publicly stated reasons will be over Iran’s nuclear ambitions, there are unspoken macroeconomic drivers explaining the Real Reasons regarding the 2nd stage of petrodollar warfare – Iran’s upcoming euro-based oil Bourse.

Candidly stated, ‘Operation Iraqi Freedom’ was a war designed to install a pro-U.S. puppet in Iraq, establish multiple U.S military bases before the onset of Peak Oil, and to reconvert Iraq back to petrodollars while hoping to thwart further OPEC momentum towards the euro as an alternative oil transaction currency.

Similar to the Iraq war, upcoming operations against Iran relate to the macroeconomics of the `petrodollar recycling’ and the unpublicized but real challenge to U.S. dollar supremacy from the euro as an alternative oil transaction currency.

But despite the fall from prominence of the Euro since the publication of the above article, Iran continues, to this day, to evade the dollar (Wikipedia outlines it well enough). For example, Iran is now “said to seek yen oil payments from India.”

Yet in the face of new sanctions, which include a ban on trading gold and silver with Iran (no surprise if this is a currency war), Iran has not yet dollarized. However, the rial’s ominous inflation rate does not bode well for its future. From Jeffrey Lewis, just yesterday (here):

Iranian President Mahmoud Ahmadinejad raised interest rates on Iranian bank deposits to up to 21 percent on January 23rd, according to the official Iranian news agency IRNA. Iran’s central bank also urged Iranians to buy U.S. Dollars only if they were traveling abroad and not to hoard them as a hedge against economic uncertainty.

The move by the Iranian central bank exacerbated the already steep plunge in the Iranian Rial, which has lost more than 50 percent of its value against the price of U.S. Dollars in the open market over the last month.

The ominous slide in the Rial began in April when the Iranian central bank decided to cut rates to a range of between 12.5 to 15.5 percent in April, prompting people to put their money in safe havens like precious metals and the U.S. Dollar. Inflation in Iran is currently running at 20 percent.

For more on the dollarization of Iran in its current context, see here.

Written by M. James

February 3, 2012 at 5:06 pm