Market Overview

How Trump's Travel Ban Will Impact The Dollar


Enter any of the topics listed in the title of this article in a search engine and plenty of reports will appear on the screen. With President Trump banning travelers from seven predominantly Muslim countries, Iran announced it would stop using the US dollar “as its currency of choice in its financial and foreign exchange reports,” as reported in the local Financial Tribune.

The governor of the Central Bank of Iran, Valiollah Seif, made the announcement in a televised interview on January 29. The change will be effective March 21, impacting all official financial and foreign exchange reports.

Seif went on to say, "Iran's difficulties [in dealing] with the dollar were in place from the time of the primary sanctions and this trend is continuing, but we face no limitations regarding other currencies."

Forbes noted that “As a result of years of sanctions imposed by a succession of US administrations, Iran has very little trade with the US. Its most important trading partner is the UAE, which accounts for around 24 percent of all Iranian imports and exports. China is not far behind with 22 percent, followed by Turkey, India and the EU, all of which account for around 6 percent of Iran’s trade.

"This leaves open the question of what Iran will use to replace the dollar. Seif said in the television interview that 'We have to set a currency as the basis of financial reporting that has better stability and greater application in our foreign trade,' according to the Financial Tribune.”

Alice Salles, in, further explains: “In the 1970's, the Arab nation struck a deal with US President Richard Nixon establishing an alliance that would maintain the dollar as the standard oil exchange currency in exchange for military support from America. The use of the dollar as a standard currency for oil exchange was accepted by Saudi Arabia and the remaining block of Organization of the Petroleum Exporting Countries (OPEC), which include Iran and 11 other Middle Eastern, African and South American countries.

OPEC countries account for 42 percent of global oil production, holding 73 percent of the world’s oil reserves. Due to its influence, the use of the US dollar as its standard currency helps to keep demand for the US dollar high, giving the currency the support it requires to remain ‘the world’s reserve currency’ and preventing the effects of inflation from hitting the US consumer.

"Iran’s decision to exit this deal might impact the US economy and threaten the dollar, prompting the US government to take stern measures to combat Iran’s actions. After all, Iran holds 13 percent of OPEC’s oil reserves.”

In March, when 13 percent of OPEC will be ditching the dollar, expect other currencies such as EUR and GBP to get stronger. Expect movement in the currency markets. As dollars are sold, the price of oil should rise.

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Posted-In: Binary Options News Education Eurozone Futures Commodities Options Forex


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