The Central Bank has begun selling currency with a limit of $10,000 for each individual over 18 years old starting Saturday, October 2. Accordingly, applicants can purchase the currency they need from 5 selected banks by presenting their national ID card. The initial selling rate for the dollar has been announced as 259,000 tomans.
Increasing Supply and Managing Demand
This policy aims to manage the market and regulate demand, with up to $2 billion in cash to be supplied. By increasing the purchase limit from $5,000 to $10,000, the capacity for direct currency supply to the public has increased, and part of the currency demand that previously went to the free market can now be met through an official channel. This change may lead to a reduction in pressure on transactions in the free market.
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The increase in demand in the currency market is not limited to a single factor. Economic and political uncertainties have led many households and economic actors to seek currency as a precautionary asset. External pressures and sanctions have also impacted the difficulty of financial transactions and increased trade costs.
Market Expectations and Impacts
The currency market is also influenced by the expectations and sentiments of its participants. When currency supply is perceived to be limited, precautionary demand increases. However, a noticeable increase in supply from the Central Bank can moderate these expectations. The most important message of this policy is the increased capacity for intervention and supply from the Central Bank, which has shown that it is ready to respond to demand by announcing a supply of up to $2 billion.
The influx of more currency into the market can have an impact in two ways: meeting the actual needs of the public from the official market and moderating upward expectations. Especially in conditions where free market transactions are influenced by precautionary demand, greater access to official currency can reduce the incentive to buy at higher prices in the unofficial market.
The effectiveness of this policy also depends on how it is implemented. The selling rate of currency, the continuity of supply, and the ease of access for applicants are among the factors that will influence the level of public acceptance of this plan. Ultimately, this policy can serve as a tool for managing short-term volatility in the currency market.
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