Fish do have a sense of smell. Rays and other Elasmobranchs, in particular, have an excellent sense of smell. Anything producing an odor does so by throwing off molecules from it (the source of the smell). These molecules are termed as volative (easy to evaporate); that's why you can't smell something like steel since nothing evaporates from its surface. Fish have chemoreceptors in their nares (specialized olfactory receptor neurons) that come into contact with these molecules and send signals to the olfactory cortex in the brain where smells are percieved as being familar or unfamiliar.
There's a fairly in-depth paper on the olfactory senses of Elasmobranchs available on the web. It's written by Meredith and Kajura of Florida Atlantic University.
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Thanks for the post. Very informative info.
