February 15, 2019
The black and red lines on the accompanying chart show the rial-to-dollar open market daily sales rates by two different published measures.
The green line shows the rate on the government-run NIMA, an exchange where export firms are supposed to sell their foreign currency revenues to import firms. The rate there is extremely erratic, bouncing around from 80,000 to 100,000 rials to the dollar. There are also many days with no sales recorded at all, telegraphing that this is not a very active market. The huge swings also signal that there are few sales. But the government does not publish the sales volume.
The open market (black and red lines) is where the general public must go to get foreign currency.
The open market began to see a slow but steady erosion emerge in the spring of 2017, not long after President Trump was inaugurated and long before there was any serious talk about killing the nuclear deal. The depreciation, however, accelerated last summer shortly after Trump announced May 8 that he was leaving the deal.
The chart at right shows the rial at its worst in late September when it hit 190,000 to the dollar. It should be noted, however, that this was just a brief spike. The dollar sold for more than 150,000 rials only for seven trading in late September. As a practical matter, the rate of 150,000 rials to the dollar is the non-panic worst price.
The rial improved dramatically in the fall, going from 150,000 to the dollar at the start of November to 100,000 in mid-December, just six weeks later. Central Bank officials boasted that they were guiding the exchange rate to 80,000, which they described as a fair rate.
But, in the two months since mid-December, the rial has gone from 100,000 to 120,000 to the dollar. While that loss in value doesn’t look very dramatic on a chart that shows a spike to 190,000, nonetheless that is a loss in value of 20 percent in just eight weeks.
That loss in value started just days after Supreme Leader Ali Khamenehi “ordered” the Central Bank on December 8 to boost the value of the rial, according to Central Bank Governor Abdolnasser Hemmati.
Many Iranians, however, believe the regime deliberately sparked the depreciation to address its shortage of funds.
Mehrdad Emadi, an Iranian-born economist at London’s Betamatrix consultancy, told Reuters the regime was able to sell dollars for vastly larger volumes of rials that it needed to bail out state banks and pension funds.
Hemmati, however, said the rial’s decline was the result of a “heavy attack” mounted by the United States through sanctions and intended to destabilize the economy. Hemmati also acknowledged that “very high” levels of corruption within Iran have exacerbated the problem.
