PDA

View Full Version : Iran Drops Dollar for Euro


ORAC
20th Dec 2006, 11:58
So much for the widely flouuted conspiracy theories about the effects of Iran switching to the Euro on the dollar and the USA reaction. Didn´t even make the headlines, and sod all effect on the market.

Wonder what the next conspiracy theory will be...........

BBC: Dollar dropped in Iran asset move (http://news.bbc.co.uk/2/hi/business/6190865.stm)

Iran is to shift its foreign currency reserves from dollars to euros and use the euro for oil deals in response to US-led pressure on its economy. In a widely expected move, Tehran said it would use the euro for all future commercial transactions overseas.

The US, which accuses Tehran of supporting terrorism and trying to obtain nuclear weapons, has sought to limit the flow of dollars into Iran. It wants the United Nations Security Council to impose sanctions on Iran. Analysts said Tehran had been steadily shifting its foreign-held assets out of dollars since 2003 and that Monday's announcement was unlikely to affect the value of the dollar, which has weakened significantly in recent months.

An Iranian spokesman said all its foreign exchange transactions would be conducted in euros and its national budget would also be calculated in euros as well as its own currency. "There will be no reliance on dollars," said Gholam-Hussein Elham. "This change is already being made in the currency reserves abroad."

The currency move will apply to oil sales although it is expected that Iran, the world's fourth largest oil producer, will still accept oil payments in dollars.

Washington has sought to exert financial pressure on Iran, which it accuses of flouting international law by trying to acquire nuclear weapons. Tehran denies this, saying its nuclear research is for purely geared towards civilian uses. Most international banks have stopped dollar transactions with Iran and some firms have ceased trading with Iran altogether in anticipation of possible future sanctions.

The dollar slipped slightly against the euro in New York trading although analysts said they did not expect the reaction to be too severe. "It is something they have been saying they are going to do for quite a long time now, so I wouldn't expect any market reaction," said Ian Stannard, an economist with BNP Paribas.

The BBC's Tehran correspondent Frances Harrison said Iranian businessmen were complaining about delays in securing letters of credit and saw current conditions as a prelude to the imposition of sanctions. Tehran has urged Iranian businesses to open letters of credit in euros in the future.

pigboat
20th Dec 2006, 14:15
Wonder what the next conspiracy theory will be......

Here's one.

What with Social Security and Medicare obligations, falling value of the US dollar, massive trade imbalances and the Iraqi war, the US economy will tank causing massive lay-offs. These events will have been engineered by the Bush administration in order to avoid having to institute conscription, since the only jobs available will be with the US military.

Remember folks, you heard it here first! :p

arcniz
20th Dec 2006, 15:32
Iran is to shift its foreign currency reserves from dollars to euros and use the euro for oil deals in response to US-led pressure on its economy. In a widely expected move, Tehran said it would use the euro for all future commercial transactions overseas.

Perhaps the Iranians deserve a few passive-aggressive points for trying to counter US power in their neighborhood, but they will likely pay noticeably in real cash expenses for the adventure. Recent comments by other Middle East oil producers suggest IRAN is already hurting a bit economically due to dropping crude prices, so they may be shooting themselves in the foot with this move based on political principles rather economic ones.

Emphasizing the 'euroness' of Iranian oil serves only to decrease the potential market size and thus limit sales. Perhaps it will provoke the application of 'use taxes' on Irani oil - or some such - by Western nations that are at least as good at being small-minded for political reasons. When politicians sneer, merchants cringe. Perhaps the consequence will be to undermine the fungability of Iranian oil - its equivalence to all other oil in trade - and Balkanise the energy markets further. Certainly the actual origin of a barrel of oil can easily be determined through chemical analysis, so it will be easy enough to put other constraints on the Iranian brown stuff.

Standard Noise
20th Dec 2006, 18:21
Iran drops Dollar for Euro

Yer man Himinyjimneybad really has lost the plot then?:rolleyes:

El Grifo
20th Dec 2006, 19:09
Once the dash for the Euro starts there's no tellin' where it's gonna end :ooh:

http://www.ft.com/cms/s/277471c2-8889-11db-b485-0000779e2340.html

Spinflight
20th Dec 2006, 20:19
Does this mean they're going to stop printing millions of counterfeit dollar notes on their Shah era presses?

heretic
21st Dec 2006, 10:45
Orac
Perhaps the reaction to the Euro adoption is in the wings!
http://www.consortiumnews.com/2006/122006.html

Capt.KAOS
21st Dec 2006, 11:58
Iran drops Dollar for Euro

Yer man Himinyjimneybad really has lost the plot then?:rolleyes:Ahmadinjihad indeed lost, recently.

Poll blow for Ahmandinejad (http://news.bbc.co.uk/2/hi/middle_east/6190673.stm)

"On a turnout of 60%, the big winners seem to be moderate conservatives, while reformists have made a comeback after three poor election showings.

Not a single candidate supporting the president won a seat on councils in the key cities of Shiraz, Rasht or Bandar Abbas.

The president's supporters have also failed to make significant gains on the Assembly of Experts, which can dismiss the supreme leader."


Seems Iran's own "democracy" is working?

heretic
21st Dec 2006, 15:20
Orac
This has nothing to do with the Euro either.
http://www.nytimes.com/2006/12/21/world/middleeast/21navy.html?_r=1&oref=slogin

BenThere
21st Dec 2006, 16:05
Iran is in the process of setting up an explosion.

It may be internal, with fed up, civilized Iranians throwing the mullahs out in a domestic upheaval. Or it may be externally foisted upon it by nations who cannot accept a messianic government seeking to bring on the apocolypse with nuclear weapons. But it's coming, and it won't be pretty.

The caveat on Iran's 'democracy' is that the election slate is vetted by the mullahs. No one stands for election without their collective approval.

Tricky Woo
21st Dec 2006, 16:10
Whoops, they're moving another Death Star into the Gulf. Ooerr... here we go again, eh?

Regarding the dollar to euro switch: Iran are simply politicising a currency market bet that many countries would love to be able to politically get away with making. The dollar has some way to fall, so a switch now would preserve the value of their currency reserves. When it bottoms, they can then buy back all their dollars at a discount...

Nukes are nukes, ideologies are ideologies, but business is business.

TW

BenThere
21st Dec 2006, 17:00
I think the dollar has been oversold, though I can't say it won't be oversold further.

To assess a currency's relative value, one method is to look at where people go to shop for bargains. Today they are flying from Europe to New York to take advantage of Euro or Pound buying power in the US. I had a similar experience a few years ago when the value of Argentine Pesos had sunk to a point making it worthwhile to fly six hours for the purpose of shopping in Argentina with an armload of dollars, taking advantage of the Argentine Peso's undervaluation.

Ten years ago Europe was cheap. And before that it was Russia. All of these happy market disfunctions have corrected themselves, and the Euro and Pound will also correct themselves. In 1991, I could have had a house on the sand in Malaga for $60,000. Ponder that.

My advice is to take advantage of the arbitrage while you can. Buy US assets or goods with your overvalued currency, then profit when the ultimate correction takes place.

West Coast
21st Dec 2006, 18:18
"dollar to euro switch"

Next thing you know, they'll be petitioning to join the EU. The argument being "we use the Euro, the Brits don't...."