Tether Falls, Dollar Retreats: Has the Central Bank Hit the Brakes on the Currency Market? / Will the Dollar Fall Again?

Dollar Hits 258,000-Toman Floor as Tether Reaches 257,000; Gold and Coins Also Get Cheaper.

According to Ambassador Arjan, the currency market is facing a series of new signals these days; From the promise of wide supply of currency and emphasis on the further reduction of the dollar price to successive restrictions on the Tether market and dealing with bank violations.

Ambassador Arjan wrote: The result of these changes in today's transactions, Tuesday, October 21, was the withdrawal of the dollar to the range of 258 to 259 thousand tomans and the drop in the price of Tether to about 257 thousand tomans. The incident which coincided with the fall in the price of gold and coins, has drawn attention to the new policies of the central bank and the possibility of continuing to reduce prices.

In the gold market, each gram of 18 carat gold has reached 25 million 726 thousand Tomans based on the rate of Tehran Gold and Jewelry Association, the price of gold is 111 million 500 thousand Tomans, and the price of each coin is in the range of 260 million Tomans. These figures show how the exchange rate drop can be transferred to parallel markets; Markets in Iran's economy, especially during periods of instability, are heavily affected by inflationary expectations and dollar fluctuations.

But the main question is what happened when the policymaker talks about increasing the supply of currency, selling banknotes to applicants, limiting Tether transactions and dealing with banking violations at the same time? Can the combination of these actions put the dollar into a more stable bearish path, or will the market return to volatility after a brief retreat?

supply of 2 billion dollars; A serious test of currency policy

In recent days, the central bank has made increasing the supply of currency one of the main axes of market management. The plan to supply 2 billion dollars of foreign currency, along with the possibility of selling up to 10 thousand dollars to each national code, sent a clear message to the market, the policymaker wants to increase the access of applicants to foreign currency through official channels and prevent the transformation of precautionary demand into a wave of purchases in the free market.

The importance of selling foreign currency with a national card is that some of the applicants can meet their needs through the official route; Of course, provided that there is real access to the currency and the purchase process does not face implementation restrictions and lack of supply. On the other hand, the wide supply of currency can affect the market price when it reaches the implementation stage and the supply flow continues against the existing demand.

In fact, the market reacts to practical signs of supply rather than being calmed by announced numbers. If traders are assured that the required currency will be available and they do not have to go to the open market to obtain it, the incentive for pre-emptive purchases will be reduced. This same change in buyers' behavior can be as effective in adjusting prices as increasing supply.

Hemmati says about the further decline of the dollar; The market is waiting for actionable signs

Yesterday's statements by Abdulnaser Hemmati about the possibility of a further decrease in the dollar rate were raised in a situation where the prices in the free market are lagging behind. Such a position can affect traders' expectations; Especially those buyers who enter the market with the aim of preserving the value of the property or making short-term profits.

When public expectation tends to increase the price, part of the demand enters the market before the actual need arises. This behavior itself can increase the pressure to buy. Conversely, when there are signs of strengthening supply and the possibility of lower prices, some buyers hold back and sellers may sell their assets early to avoid further losses.

However, comments about a further decline in the dollar alone do not guarantee continued declines. What is important is the coordination between these messages and the performance of the market maker. If the supply of currency continues and real demand is answered without hindrance, it will be possible to stabilize the downward trend; But if the gap between the announced supply and the currency available to applicants is large, the market may return to volatility.

In addition to currency supply, an important part of the recent developments is related to the limitation of the cryptocurrency market. In the past years, Tether has become one of the real-time indicators for measuring the price of the dollar for many traders; A market that remains active even during the closing hours of traditional markets and can react quickly to political and economic news.

The price of Tether in today's transactions has reached about 257 thousand tomans and is close to the floor of the dollar rate in the open market. This small gap, in the current situation, indicates the importance of traders' behavior in the cryptocurrency market. However, Tether and cash dollar rates are not necessarily the same, and their difference can change due to liquidity, supply and demand conditions, and trading restrictions.

The central bank and supervisory bodies have imposed restrictions on Tether-Toman transactions in the past days. Stopping night trading from 9:00 PM to 9:00 AM, setting a daily purchase limit of 2,000 Tether for each user, and removing the market chart of this currency pair are among the measures that have been reported. The expected goal of these restrictions is to slow down the formation of emotional waves and prevent the immediate transfer of Tether market fluctuations to the expectations of dollar traders.

However, controlling Tether is different from controlling the entire currency market. If the demand pressure comes from fundamental factors such as inflationary expectations, supply constraints or increased foreign exchange needs, the limitation of a trading platform alone cannot eliminate it. The main effect of these measures, at best, is to reduce the speed of volatility transfer and limit some short-term transactions; Not a substitute for an adequate supply of currency.

Suspension of banking services of five exchanges; A new ring of limitations

The story did not end with Tether trading hours. With the new decision of the Central Bank, as of 16:00 yesterday, Monday, October 20, banking services related to depositing and withdrawing money for five cryptocurrency platforms are limited. This decision was made in a committee at the National Center of Cyberspace and its implementation was communicated to the banks.

In this report, Nobitex, Remzinx, Bitpin, Erzinja and Tetherland are among the restricted platforms. The difference between this measure and the restriction of night transactions is that the banking restriction is directly related to the route of entry and exit of Rials. A user who is able to trade on the platform still depends on deposit and withdrawal routes to buy Tether or cash out their assets. Restricting these channels can make it difficult to settle trades, pressure liquidity and reduce some market activity.

From the perspective of market management, the restriction of banking services can slow down the entry of new liquidity into Tether transactions. But the final result depends on the reaction of the traders; Because if the demand for dollar assets still exists, the possibility of transferring part of it to the cash market or other platforms is not ruled out. Therefore, reducing the activity of cryptocurrency exchanges does not necessarily mean removing the demand for currency from the economy.

Dealing with banking violations; The policymaker also pays attention to the money circulation path

Along with the measures of the currency market and cryptocurrencies, the monitoring of the banking network has also been intensified. The Central Bank had previously announced dealing with 11 bank branch heads in connection with violations related to the currency and gold markets. Financial fines were also imposed on 10 delinquent credit institutions and disciplinary measures were ordered against the heads of the mentioned branches.

The importance of these measures is that the management of the currency market is not limited only to the amount of banknote supply. The flow of money transfer, the way bank accounts are used and compliance with financial transaction rules can also affect the possibility of speculative networks. If funds from banking channels are used for illegal transactions or disruptive activities, effective monitoring and dealing with violations can increase the cost of such activities.

What is important in the evaluation of the central bank's policy is the effectiveness of these supervisions in preventing violations and increasing the transparency of financial flows.

The decline of the dollar also reached gold and coins

In the gold market, the fall of the dollar is one of the important factors of price reduction. When the exchange rate goes down, the Rial value of world gold is also under pressure and this effect can be transferred to the price of 18 carat gold and coins. Today's union rate, which means 25,726,000 tomans per gram of 18-karat gold, 111,500,000 tomans for the mint and about 260,000 tomans for the whole coin, shows the current picture of the market.

Of course, the path of gold and coins is not determined only by dollars. Global ounce changes, domestic demand and coin bubbles also play a role in the final price.

For buyers, there is also an important difference between a temporary decrease and a trend change. A price drop in one day does not necessarily mean that it will become cheaper continuously in the following days; Just as the price increase at one point is not considered as a sign of the beginning of a stable upward trend. The direction of the market movement will become clearer when the behavior of the dollar, global ounce and domestic demand is examined in several consecutive trading days.

Will the dollar go down again?

The sum of the recent developments shows that the policymaker is simultaneously following several paths to calm the market; Increasing the supply of currency, providing the possibility of selling up to 10,000 dollars to each national code, emphasizing the provision of currency for the production sector, limiting Tether overnight transactions and intensifying supervision of banking services and financial transactions. Hemmati's statements about the further decline of the dollar have also affected market expectations in the same space.

But in order to evaluate whether the dollar will go down from the range of 258 to 259 thousand tomans or not, it is necessary to differentiate between the two factors of short-term pressure on transactions and the fundamental conditions of the currency market. New restrictions can reduce the speed of oscillation and transmission of emotional signals; However, the continuation of the price drop depends on how much the actual supply of the currency responds to demand and what direction inflationary expectations and political risks take.

If the currency supply program is implemented effectively, the access of applicants to the official currency improves and precautionary purchases subside, the market will have the capacity to continue to decrease. In such a situation, the retreat of the dollar can help further reduce the price of gold and coins. On the other hand, if supply is interrupted or new demand is formed in response to economic and political developments, there is a possibility of price fluctuations again.

What can be seen in today's transactions is the simultaneous retreat of the dollar, Tether, and the prices of gold and coins; But the main test of currency policy begins here. The market should show in the coming days whether the reduction in prices is the result of a real increase in supply and adjustment of expectations, or just a short-term reaction to a set of restrictions and messages from the policy maker. The answer to this question will be determined not in the volume of circulars, but in the continuity of currency supply, the behavior of buyers and the stability of rates in the upcoming transactions.