By Behrouz Mina
October 9, 2018
After weeks of continuously falling, the Iranian rial (IRR) surprised everyone in early October as it rallied against foreign currencies in Iran’s free market.
If the plummeting rial was bewildering, its rise has been just as puzzling. Some people credit the Central Bank of Iran for the shift in fortunes, while others believe there was a full-scale market intervention to reverse the trends. But since the judiciary has banned live reporting on exchange rates, it is impossible for exchange dealers, analysts and ordinary Iranians to gain a true sense of what is happening on the market.
The changes began on October 1. The Iranian rial had fallen to 190,000 rials per US dollar in the previous week, and many commentators had predicted that it would continue to decline due to the United States-imposed sanctions. However, after a few days of stability, on Monday, October 1, the IRR began to gain, and the exchange rate against the dollar rose to 150,000 rials. Those who had purchased foreign currencies either as an investment or to save faced the prospect of losses they had strived to avoid.
Not only did currency dealers go out on streets of Tehran, Ahwaz, Mashhad, Shiraz, and Tabriz, average citizens were out too, hoping to save their assets. Social media was buzzing with rumors. Even Iran’s official media agencies reported on the frenzy, including one report that said that 30 people speculating on currency fluctuations had suffered heart attacks after hearing the news about the shifts in exchange rates.
By Thursday, October 4, the value of the dollar was falling in Tehran, while the value of the rial was gaining. The exchange rate reached 137,000 rials per dollar after improving by another 8,000 rials. The value of gold followed. Iran’s standard gold coin, known as the Bahar e Azadi, or “Spring of Liberty,” had reached 51,500,000 rials per piece; now its price declined to 44,000,000 rials, even reaching 39,000,000 rials at one point. The US dollar fell by 21 percent, and gold lost 22.3 percent of its rial value in four days. While many consider both events to be signs of an improving economy, the fact remains that the dollar and gold represent a significant share of Iranian households’ investment portfolios. Facing a market in decline, an increasing number of Iranians decided to sell their holdings. Exchange offices and dealers often refuse to bid or to buy these offerings, but the Central Bank of Iran ordered Iranian banks to purchase individual holdings.
Iranian banks began offering a low bid on Wednesday, October 3: 95,000 Iranian rials per US dollar for holdings in dollars and 115,000 rials per euro for holdings in euros. Soon two sets of prices appeared in exchange offices across Iran. Some offered to buy foreign currencies at the banks’ rates, between 95,000 and 110,000 rials. Others kept following the free market offerings and paid a price between 130,000 rials and 140,000 rials per dollar for individual holdings. And the uncertainty and confusion have only increased. There is no universal exchange rate, and prices change widely from one trade deal to another.