KARACHI: The country’s open currency exchange market experienced an exceptional buying frenzy of the Iranian rial on Monday when information about the new deal between the US and Iran came out from trading markets in Karachi, Lahore, and Quetta. The Exchange Companies Association of Pakistan informed that on one single day, Rs25 billion of the Iranian currency was sold off by traders, which indicates the strength of interest shown by Pakistanis in such deals.
There was an instant and strong response in the Pakistan market towards the Iranian rial. In just one day of trading, the price of one package of 10 million rials the common denomination used for exchange within the Pakistan money markets increased by Rs1,500, with the new rate being around Rs4,000 for 10 million rials.
Malik Bostan Affirms Exceptional Demand
Chairman of the Exchange Companies Association of Pakistan Malik Bostan stated that the demand was indeed exceptional. The chairman affirmed that the demand was abnormally high not only on the announcement day but also afterward. Malik Bostan, who has been monitoring the movement of the Iranian rial in the open market of Pakistan ever since the US-Iran dispute erupted in the current year, added.
The calculations by the currency association confirm that the extent of transactions is definitely beyond the usual levels of trading activity. According to the Exchange Companies Association of Pakistan, as much as $6 million of the Iranian rial is changing hands every day in Pakistan during times of highest demand – an indication of the extent to which the currency has been integrated into the Pakistani trade system.
Karachi-based dealers claim that 10 million rials, which used to trade around Rs2,500 pre-war, can now be found near Rs10,000, and Lahore-based money changers claim that 10 million rials have moved from trading at around Rs2,000 to Rs8,000. However, despite the quadrupling of the street price for the currency, the rial had certainly not been rehabilitated on an international level, as its value against both the dollar and euro remained very low on foreign exchange markets.
It is the price of the rial in Pakistan’s black markets, particularly those that have ties to the illegal trading that takes place on Pakistan’s western border, which has increased. With the loosening of Pakistan’s trade routes through Iran, the desire for rial banknotes in this area has increased significantly, leading to an increase in prices.
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Peace Agreement Prompts the Next Round
The peace agreement between the US and Iran has once again provided some added impetus to a dynamic market. The currency has seen its value climb up to 50 percent due to news of a peace agreement between the US and Iran via the mediation of Pakistan, hitting a high of Rs15,000 for 10 million Iranian rials.
The mediation role of Pakistan in the dispute between the US and Iran is itself a key element in shaping the sentiment regarding currencies. With the visit to Tehran by Field Marshal Asim Munir and diplomacy tours by the Prime Minister Shehbaz Sharif throughout the region, the traders from Pakistan have become increasingly convinced that the peace formula will stick and may result in further strengthening of the rial currency in domestic exchanges.
Experts Advice Cautious Reading
While all of this is happening, there have been some warnings from the experts regarding over-interpretation of the price trend in the local market. The experts advised that the rial continues to be very weak in the international market while the recent increase was specific to Pakistan only.
However, it is important to note that the difference between the Pakistani street price of the Iranian currency and the position of the rial on the international level is based on the simple structural reality of the matter at hand. Iran continues to be under a wide variety of international sanctions and its banking system continues to be excluded from the international monetary system.
Market Uniquely Different from Others
It is precisely what the Iranian rial market of Pakistan showcases. During the conflict period, there has been an increase in cross-border trade via Baluchistan, thereby increasing the demand for rials without ever showing up in any official statistics on trade.
Rs 25 billion traded just on one day alone confirms the fact that Pakistani currency dealers, traders on the border, and small-time speculators are equally monitoring the US and Iran diplomatic talks. The deal has passed a definite judgment and the Iranian rial market in Pakistan stands open for business.
Nayab Fatima is a university graduate and an emerging media professional with a strong passion for journalism, research, and independent reporting. She specializes in developing well-researched, fact-based, and analytical news stories covering a wide range of sectors, with particular expertise in technology, telecommunications, aviation, and the automobile industry.
