The Japanese yen weakened sharply against the US dollar even after the relatively strong Japanese GDP numbers. The country’s statistics office said that the economy expanded by 3.0% in the fourth quarter after rising by 5.3% in the previous quarter. This growth led to an annualized increase of 12.7%, higher than the expected increase of 9.7%. This growth was mostly because of a 1.0% increase in external demand, 2.2% increase in private consumption, and 4.5% gain in capital expenditure. While the Japanese yen fell, the Nikkei 225 index rose to ¥30,000 for the first time in more than 30 years.

The euro rose today even after the relatively weak economic numbers from the European Union. According to Eurostat, the bloc’s industrial production declined by 1.6% in December as more countries in the bloc enacted new lockdown measures to reduce infections. The production declined by 0.8% on an annualized basis after falling by 0.6% in the previous month. The numbers came a day before the agency is scheduled to publish the fourth-quarter GDP data.

The GBP/USD rose sharply today as the rally of the British pound continued. The pair rose to a near three-year high of 1.3910. On the daily chart, this price is above the 25-day and 50-day moving averages. It is also above the Ichimoku cloud. It is also slightly below the upper side of the ascending channel. Therefore, the pair may continue rising as bulls target the upper side of this channel.

The EUR/USD was in a tight range today as traders digested the overall weak US dollar and the weak EU economic data. On the hourly chart, the price is still in a narrow range between 1.2113 and 1.2142. The price has also moved slightly above the 25-day exponential moving average while the Relative Strength Index (RSI) has continued to rise. The pair may continue rising as bulls target the upper side of the channel at 1.2142.

The USD/JPY rose sharply today even as the US dollar dropped across the board. It rose to an intraday high of 105.40, which is slightly above the 23.6% Fibonacci retracement level on the four-hour chart. It is also above the 28-day EMA and is slightly below the median line of the Andrews Pitchfork indicator. Therefore, the pair may continue rising as bulls aim for the resistance at 105.55.

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The same kept happening to the euro’s rate for the second successive day, which fell by 150,000 rials on Tuesday, to be sold at 236,000 rials in the foreign currency market, IRNA reported.

On Tuesday, official currency exchanges sold and purchased each US dollar at 206,000 rials and 199,000 rials respectively.

According to sanarate.ir, an information website belonging to the Central Bank of Iran (CBI) announcing the rate of foreign currencies in the domestic market, the rates of the dollar and euro had declined by 150,000 rials and 170,000 rials on Monday to stand at 229,160 rials and 253,360 rials, respectively.

Over the past few days, prior to the start of the downward trend, the rates of the two major currencies had kept soaring, reaching record highs.

The rate of the rial began its declining trend in May 2018, when the US withdrew from the Joint Comprehensive Plan of Action, signed between Iran and the P5+1 in July 2015, and the reimposition of Washington’s unilateral sanctions on Tehran. Mainly targeting Iran’s foreign trade, including oil exports, and the banking sector, the sanctions have been imposed in a bid to cripple the Iranian economy, a pipe dream pursued by the US and its allies, including Israel, which never came true.

Iranian officials maintain that in addition to the unilateral sanctions, psychological factors also led to the increase in foreign currency rates over the past days.

In an address to a press conference on Tuesday, Ali Rabiei, the Iranian government’s spokesman, blamed psychological manipulation of public opinion by ill-wishers on social media and abroad for the rise in the rates, according to mehrnews.com.

He said such bids lead to an anticipation of inflation in the domestic market.

Rabiei added that among the reasons for the drop in the rates is that Iranians have stopped heeding such activities and propaganda.

“Our foreign currency income will definitely increase in the light of our oil exports and the injection of forex revenues into the domestic economy. The real foreign currency rates are definitely lower than what we see in the market today.”

He stressed, “During the past two weeks, Iranian President Hassan Rouhani and CBI Governor Abdolnaser Hemmati explicitly announced that the increasing trend of forex rates would not continue, and the reason is clear. The realities of our market, as well as the balance between supply and demand, show that the increase in rates is not real.”

He added Iranian exporters are increasing their injection of foreign currency income into the country’s secondary foreign exchange market, known by the local acronym Nima (Integrated Forex Deals System), thus tilting the balance in favor of the supply side of the domestic market.

Rabiee said this comes as the government has also controlled the demand side by boosting domestic production.

“Stimulating domestic production will not only reduce domestic demand for foreign currency resources but will also help further increase the country’s output and reduce the price of other products.”

He noted that the government’s diplomatic moves in the field of foreign policy have also helped provide the country with better access to foreign currency resources, expressing hope that Iran’s exports would grow with the easing of restrictions imposed on trade between regional countries due to the coronavirus outbreak.

The pandemic has led to the closure of border crossings between Iran and its neighbors and, thus, reduced exports from the country.

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TEHRAN (Iran News) – Iran switches to currencies other than the US dollar and it’s showing the first signs of paying off and rising foreign trades.

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TEHRAN (Iran News) – Head of Plan and Budget Organization of Iran said Sunday that Iran’s budget for the next fiscal year still defines the exchange rate for importing basics remains at 4200 tomans to $1.

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“We are trading with Russia using the ruble and with Turkey using the lira, and this trend is gradually removing the dollar from the trade cycle,” he added.

“Many countries are now willing to trade with their national currency so that the US does not monitor their trade,” the CBI chief stated.

“Now all of our financial transactions with Russia are conducted in the national currency” he said, adding that about 30 to 40 percent of Iran’s transactions with Turkey are in national currencies of the two countries, and the rest are carried out in the euro.

Earlier this month, Russian President Vladimir Putin said in a press conference that Russia has reached an agreement with Iranian President Hassan Rouhani about trade with national currencies.

Putin said the two presidents reviewed applying an advanced payment system.

In remarks on September 17, Hemmati had said that Iran’s financial telecommunications system, known as SEPAM, has replaced the Society for Worldwide Interbank Financial Telecommunication (SWIFT) in the country’s financial transactions with Russia.

The CBI chief also referred to Rouhani’s meeting with his Russian counterpart, on the sidelines of the fifth trilateral summit of Iran, Russia and Turkey in Ankara on September 16 and said the banking ties between Tehran and Moscow were also discussed at the meeting.

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Following is the text of the interview:

What is the history of the using of sanction in US foreign policy?

Sanctions have been part of US foreign policy since the beginning of the Republic.  They’ve been applied against a range of other states and actors, including countries that are now firm US allies like the United Kingdom. To this end, it is worth noting that sanctions have also been a part of many foreign policies. The difference now, I think, is the degree to which the United States can operationalize its global economic position to implement sanctions.  But, arguably, other superpowers — for their time — had similar power.

What is the importance of sanction in US foreign policy?

It is an important tool in the conduct of foreign policy for creating leverage to resolve problems.  All countries seek to build leverage as they enter into negotiations or deal with conflicts.  Sometimes, the leverage is through sanctions.  Other times, it is through violence or building up coalitions of partner countries.

Which preconditions needed for success of sanctions in US foreign policy?

In my opinion, the conditions are: 1) a clear, well-articulated strategy with identified objectives; 2) a clear understanding of the target of sanctions, its vulnerabilities, and its interests so that sanctions can be tailored to their purpose; 3) international support and, better, cooperation in implementing sanctions; and, 4) a clear linkage to negotiations so that the leverage generated by sanctions can be applied toward a diplomatic settlement.

For success of sanctions on Iran, you have emphasized on international support and consensus. Do you think without the international support, US imposing sanctions on Iran will not be successful?

I think that it is much more difficult.  I think the United States can generate pressure on Iran and has already done so.  I think it is harder to see this pressure adding up to a resolution of the problems the United States identified in choosing to impose those sanctions, in no small part because Iran may feel that it is unnecessary to respond to only the concerns of one country and an adversary at that.

Dollar is a useful instrument in imposing sanction by US. what is your opinion about this? Can dollar remain as a useful instrument in imposing sanction by US in the future?

The dollar is less a useful instrument than it is a resource that countries, banks, and companies want to use.  By threatening to withhold access to the dollar (and, more importantly, access to the United States economy), the United States can make it harder to resist its policy choices.  The key factor in its continuing utility is the degree to which people, companies, and banks want to do business in the United States and how ready they are to walk away from that in order to do business with US-sanctioned targets.  Thus far, we are not seeing that in large scale.  As time moves on, we may.

Regardless of the result, INSTEX is a try by Iran and other countries for evading the SWIFT and dollar base mechanism’s role. Do you think that dollar based mechanism will be weakened in the future?

It may, but it won’t be because of INSTEX.  INSTEX may work or it may not, but the value of the dollar — and, again, more importantly, the value of the US economy and access to it — remains high for international business.  So long as that remains important to international business, it will be hard for foreign companies, banks, and governments to ignore US policy demands.

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The bilateral monetary treaties are a mechanism to ditch dollar in trade transactions. A currency swap agreement between states could potentially lessen the US dollar’s influence on the global energy and other markets.

In general, the Central Bank of Iran (CBI) should fulfill its obligations in this regard while the Iranian Foreign Ministry is responsible for facilitating and easing economic affairs, Zarif said.

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