The Decline in Currency Prices Continued for the Fifth Consecutive Day

The downward trend in currency prices in the free market of Tehran continued on Wednesday, December 21, for the fifth consecutive day, with the price of the US dollar falling below the psychological threshold of 10,000 tomans. According to ISNA news agency, the ongoing decrease in currency rates in recent days has led holders of household dollars to sell their dollars in the market, resulting in long queues in front of currency exchange offices in Tehran. Some news websites in Iran reported that the price fluctuation range for the US dollar is now around 9,000 tomans. Tasnim news agency, citing 'market activists', reported that 'buying and selling is currently very low on Ferdowsi Street and in the free market'. The agency also reported 'long queues in front of bank currency exchanges'. It noted that 'the reason for people's visits to state exchange offices instead of brokers and free exchanges is that the current buying price of the dollar at state exchanges is higher than in the free market, allowing people to sell their currencies at 10,050 tomans by presenting their national ID cards'. IRNA news agency also mentioned that 'the National Currency Exchange of Iran has set the market floor rate at 10,050 tomans for buying each dollar and 10,100 tomans for selling it'. According to reports from these news agencies, the dollar price, which had dropped to less than 10,000 tomans before noon, returned to a fluctuating channel above 10,000 tomans in the afternoon. The report noted the buying and selling prices of the euro on that day as 12,000 tomans and 12,100 tomans, respectively. Household and non-professional currency buyers, who had purchased dollars in recent months to gain profit or preserve the value of their rial assets, have now become sellers due to the declining price trend. Increased supply and intervention by the central bank as the main player in the currency market in recent weeks, along with granting special powers to the central bank to control fluctuations in this market, are considered the main reasons for the price decrease in recent days. Other reasons for this downward trend include the central bank's correction of its policy towards exporters and granting exemptions to exporters for supplying their exported currencies in the free market instead of the secondary market, which has increased the supply in the market. Additionally, the Iranian customs has completely lifted the ban and restrictions on currency imports, allowing any currency to be imported into Iran without limitations, and penalties have been established for customs officials who prevent currency imports. On the other hand, the central bank has limited banking transactions since December 17, 2018, allowing only 50 million tomans to be transferred daily from each bank card, and since the national ID code of cardholders is registered in each transaction, each individual can only conduct banking transactions up to 100 million tomans daily from any number of bank cards. This decision by the central bank has made speculation difficult for brokers and traders, especially those conducting currency transactions in neighboring countries and beyond. Alongside these factors, precautionary demand and speculation for purchasing various currencies, especially the US dollar, have subsided following months of continuous price increases, and fewer people are willing to convert their rials into other currencies. In recent months, amid record-breaking dollar prices in the free market of Iran, Ayatollah Ali Khamenei, the Supreme Leader of the Islamic Republic of Iran, referred to the 'devaluation of the national currency' as one of Iran's economic problems. Abdolnaser Hemmati, the head of the Central Bank of Iran, recently mentioned that in a recent meeting with the Supreme Leader, Ayatollah Khamenei had given directives to the central bank and other banking officials to 'strengthen the value of the national currency'. The dollar price, which was sold for less than 5,000 tomans in the free market at the beginning of this year, began to rise amid increasing concerns about US sanctions against Iran and the government's and central bank's directive policies for unifying the exchange rate, reaching as high as 19,000 tomans at one point. With changes in the central bank's policies, new measures, and the psychological effects of sanctions being priced in, the dollar has begun to decline. However, some analysts express concern that given the existing challenges in selling and exporting Iranian oil and the restrictions on the return of oil revenues to the country, the central bank will be unable to supply currency to the market in the long term, criticizing the artificial decrease in currency prices in the free market. One of the concerns regarding the future of the currency market is the vast liquidity present in the Iranian economy; although a significant portion of this liquidity is in the form of quasi-money, converting these bank deposits into cash and circulating it in the markets could lead to severe price fluctuations. The unification of the exchange rate, or at least bringing multiple exchange rates closer together and limiting the fluctuation channels of these prices, is a demand that has been emphasized in recent days during meetings between several economists and the head of the central bank.