A woman walking out of an exchange office in Iran

Rial Bounces Back After Intervention And Hopes On JCPOA

Thursday, 03/02/2023

Iran’s national currency has bounced back in the past three days, regaining about 10 percent of its lost value since a historic low four days ago, leaving pundits wondering about the reason. 

The exchange rate of the dollar touched over 600,000 rials earlier on Sunday but the Iranian currency began to rise to close at about 540,000 against the dollar on Thursday, which is the last weekday in Iran. 

Despite the rebound, the rial is still down 100 percent compared to six months ago.

Iranian media is replete with different scenarios for the rebound, but the most plausible explanation still seems to have been the injection of a large amount of foreign currency into the market by the Central Bank of Iran. 

Another reason mentioned in Tehran media is a bit far-fetched guesswork that the country's foreign minister's trip to Geneva during the week and the possibility of resuming negotiations to revive the 2015 nuclear deal injected some optimist into the market.

In an article earlier in the week, Jomhouri-e Eslami newspaper argued that fluctuations in the market are out of the hands of the government as the country’s economy is tied to the fate of Iran’s nuclear deal and its relations with the other countries. The paper and other media outlets speculated that foreign minister Hossein Amir-Abdollahian’s trip to attend a United Nations human rights meeting might also re-open the door to nuclear talks resulting in the lifting of US sanctions.

The paper described the extreme rise and fall of the dollar in only a few days as a lesson for the authorities, highlighting that the country can survive the current critical period through reviving the JCPOA and declaration of neutrality in the Russian invasion of Ukraine as well as a practical approach to a balanced policy in international relations.

Reports about the imminent visit by the head of the International Atomic Energy Agency (IAEA) Rafael Grossi to Iran for high-level meetings, purportedly slated for Friday, was another reason mentioned by the country’s media. The visit comes amid discussions with Tehran on the origin of uranium particles enriched to up to 83.7% purity, very close to weapons grade, at its Fordow enrichment plant. 

CIA Director William Burns

Remarks by CIA Director William Burns about Islamic Republic not pursuing an atomic bomb was also mentioned as being behind the halt in the devaluation of the rial. "We don't believe that the Supreme Leader in Iran has yet made a decision to resume the weaponization program that we judge that they suspended or stopped at the end of 2003," Burns said. 

While merchants told Iran International earlier in the week that trading in Tehran markets had largely come to a halt as the rial was near its all-time low, the local media confirmed reports that the Central Bank of Iran intervened in the currency market to stop the freefall of the rial. On Sunday, the bank injected $700 million in UAE dirhams and the rial began to rise from its all-time low of 600,000 against dollar.

The rial’s plunge to 575,000 Saturday, February 25, exacerbated chaos in several of Iran's major markets and brought many businesses to near standstill. The rial fell from 35,000 to more than 600,000 against the US dollar in exactly five years. This led to very high inflation, officially at more than 50 percent, which has impoverished tens of millions of Iranians. An Iranian economist says the role of US sanctions in causing economic chaos in Iran has been significant.

All in all, the Islamic Republic seems incapable of major changes in the market as it is strapped for cash with some reports saying the government does not allow ATM machines to give cash more than the current limit of 2,000,000 rials – about $4, which barely can buy a hamburger today in the capital.

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