The Increase of the US Dollar in Iran's Currency Market Has Structural Reasons

Fereydoun Khavand, a university professor and economic expert in Paris, referring to discussions about the decline in foreign currency prices in the Iranian market, told Radio Farda that the increase in the US dollar in Iran's currency market has structural reasons. One day after the dollar price rose to over four thousand tomans, the Deputy for Exports at the Central Bank announced that 'high demand' at the end of the calendar year has caused the increase in currency prices, and this demand will 'subside' in the coming days. According to the state news agency IRNA, Samad Karimi on Thursday, December 23, described the demand created in the market for currency purchases as 'seasonal, transient, and non-fundamental.' Fereydoun Khavand also confirmed the possibility of a decrease in the dollar price in the coming days, believing that this decrease is due to 'the high inflation rate in Iran compared to the inflation rate in the dollar region and also the average inflation rate in the world, which is increasing the dollar in Iran.' According to Mr. Karimi, based on analyses from the Central Bank, the current rates of major currencies in the market are 'temporary and mostly due to commercial and travel demands and currency remittances' at the end of the calendar year. He emphasized that it is expected that as this period passes, the demand for travel and commercial currency in the market will 'subside and the rates of currency remittances will decrease.' Mohammad Baqer Nobakht, the government spokesman, also announced on Wednesday that from the government's perspective, the dollar price is 'not real' and this price was set at three thousand three hundred tomans in the budget for the year 1396. The statements of the Deputy Governor of the Central Bank regarding the reasons for the increase in the dollar price come at a time when some experts believe that the increase in the value of the dollar index in global markets is influenced by the US Federal Reserve's decision to raise interest rates by 0.25% to 0.75%, which is considered the main reason for the increase in the value of the dollar index globally and the strengthening of this currency against other competing currencies. Fereydoun Khavand believes that the best way in the current situation is a gradual increase in the dollar price, arguing that otherwise the dollar will 'spring up,' which he claims is detrimental to Iran's economy. According to some analyses, Donald Trump's strict stance on the JCPOA and the future of Iran's nuclear agreement with world powers has led to a strengthened view among domestic traders in Iran's free currency market that perhaps in the future, the trend of oil sales and the flow of foreign currency revenues into the country will face restrictions, which has led to an increase in the value of the dollar. Other factors affecting the strengthening of the dollar's value in the Iranian market include disruptions in the supply of currency to the market from petrochemical companies, which are among the most important sources of currency supply to the market. Meanwhile, the Deputy for Exports at the Central Bank predicted that in the last quarter of the year, with the entry of currency from non-oil exporters and the increase in the Central Bank's supply, the currency market will 'adjust.' Samad Karimi, the Deputy for Exports at the Central Bank of Iran, also stated that 'non-fundamental factors such as increased activities of currency brokers and the continuation of the phenomenon of smuggling goods and currency make controlling the market difficult.' Previously, Valiollah Seif, the head of the Central Bank, also attributed the increase in the dollar rate in the free market to 'seasonal demand' and stated that based on past experiences, after passing this period and the entry of currency from non-oil exporters into the market, the rate will decrease in the last quarter of the year. The dollar price in the Tehran free currency market crossed the four thousand tomans mark on the first day of winter 1395, setting a new record in Iran's currency market. Meanwhile, according to Fars news agency, on Thursday, the dollar price decreased to three thousand nine hundred ninety-seven tomans, but 'most currency traders in the market state that this return and price decrease is unstable and the dollar will again cross the four thousand tomans mark.' The dollar price at the beginning of the current solar year fluctuated around three thousand five hundred tomans, which experienced an increase of more than 14% when it reached the four thousand tomans range on the first day of winter. The currency price has increased since 1391 and has never returned to the prices of those years. After the sudden increase in foreign currency prices in the Iranian market, government officials accused some currency exchange offices of disrupting the currency market.