The dollar's price rises again and the Central Bank of Iran remains silent

The second half of the solar year began with an increase in the price of the dollar. The price of the dollar has re-entered the 28,000 toman channel. The price of coins has also increased. The increase in the exchange rate of foreign currencies in Iran has been accompanied by the passivity and silence of the Central Bank.

The upward trend in the value of the dollar in Iran began on the first day of October and has continued in recent days. On Wednesday, October 7 (September 29), the price of one dollar crossed the 28,000 toman mark.

According to statistics published by Iranian media, excluding one day in September of this year, such an increase in the buying and selling of dollars and euros in the Iranian currency market has been unprecedented over the past 11 months.

At first glance, there are two important factors for the increase in the dollar's value. First, the Taliban's seizure of power in Afghanistan has reduced the possibility of meeting the needs of the Iranian market in dollars.

Assessments indicate that since the fall of Kabul until today, the price of the dollar in the Iranian market has increased from 24,000 tomans to 28,000 tomans.

On the other hand, the interruption in nuclear negotiations has cast a shadow over the optimism in the currency market regarding reaching an agreement and lifting sanctions.

From this perspective, we can point to the effects of the speech of French Foreign Minister Jean-Yves Le Drian at the United Nations. He emphasized that the passage of time is not in the Islamic Republic's favor and that the more time passes, the less likely it is to find a solution to the Iranian nuclear dispute and revive the JCPOA.

On the other hand, the US government also knows very well that as long as the Islamic Republic has the ability to sell oil to China, the scope of the leverage effect of economic pressures resulting from sanctions will be reduced.

In this regard, the US government has begun negotiations with China to prevent the import of crude oil from Iran. This issue has also had a negative impact on the market's uncertainty regarding the inflow of foreign exchange and the prosperity of trade.

Central Bank: Silent Witness or Hidden Actor?

The economic group of the newspaper "Etemad" agrees with the words of economic expert Albert Baghuzian. Baghuzian sees the reason for the increase in the dollar's price in the monetary policy of the Central Bank, regardless of the two factors mentioned.

In any case, to answer the question of where to look for the reason for the increase in the dollar-to-toman exchange rate, in the government or in the market, this economist believes that the Central Bank did this to compensate for the budget deficit.

Baghuzian addressed the silence and inaction of the Central Bank and said: "Recently, the Central Bank has not reacted to this issue and has not said anything about the management of this market. There has been complete silence in the country's foreign exchange sector, and this is not a good sign at all."

He, who works in the field of banking and finance, believes that increasing the dollar rate to 28,000 tomans or 30,000 tomans is not of much importance to the Central Bank.

Baghuzian continued: "But whether the government can finance its budget deficit in this way or not is important to this institution, but in my opinion, the dirtiest way to finance the government's budget deficit in this way is to increase the exchange rate, because its consequences are not small and it leads to the price increase of all goods."

Raisi's red line

Ebrahim Raisi, the 13th Prime Minister, recently claimed that inflation was his government's red line. He warned officials to avoid doing anything that would increase inflation.

The aforementioned economic expert, however, paints a different picture of the situation. He says: "Unfortunately, it must be said that the increase in the dollar rate is leading to an increase in the inflation rate, and during this period, no positive movement has been seen towards reducing prices or even stabilizing them."

The increase in the price of the dollar has, among other things, caused the price of the coin to increase. Interestingly, the price of gold in global markets has not only not increased in recent days, but has even decreased slightly.

While the price of an ounce of gold in global markets had fallen to less than $1,750, the price of the coin reached more than 12 million tomans on Wednesday, October 27.

In its analysis, the "Economic World" newspaper sees the desire to buy coins at a price of more than 12 million tomans only in relation to the fact that buyers are optimistic about the continued upward trend of the dollar in the Iranian currency market.

Reformist market, conservative market

And finally, the "Islamic Republic" newspaper, with an article titled "What should we write the dollar worth 28,000 Tomans in?", addressed the approach of the Raisi and Rouhani governments towards currency market fluctuations.

The author of this article wrote: "The market is neither fundamentalist nor reformist nor moderate nor anything else. The market is the market, with a sensitive pulse that feels and even perceives everything sooner!"

The newspaper wrote that the coming and going of individuals has no effect on the market situation or people's livelihoods: "The market takes its course and society follows the same rule."

What the author is implicitly saying is that currency market fluctuations are determined by the market itself. This claim is only true if the central bank's silence and inaction in the face of a sudden increase in the dollar's value is not related to the president's attempt to finance the budget deficit from this source, but is the result of something else.

The Rouhani government, the Central Bank during his rule, and Eshaq Jahangiri and his deputy had earned huge revenues by creating the “Jahangiri Dollar” and playing with the dollar’s ​​price in the foreign exchange market. Now it seems that Raisi has adopted the same policy.

Source: DW