Deciphering Iran’s sudden currency fluctuations

Al-Monitor- Recent fluctuations in the free market rate of the Iranian rial have caused concerns within the country’s business community that the currency may experience a sharp decline in value due to economic and political upheavals.

The Iranian economy has been operating with a multitiered exchange rate system for the past three decades. Currently, there are two official exchange rates: the official interbank (forex chamber) rate, which is used by banks for official hard currency transactions, and the so-called free market rate, which is used by licensed foreign exchange bureaus for all other transactions using the hawala system.

Traditionally, the free market rate has been a valid indicator of the mood in the Iranian economy. The last major collapse of the rial value came about in the second half of 2012 when harsh sanctions prevented the Central Bank of Iran (CBI) from repatriating needed hard currency to manage the artificially kept rate of 11,000 rials to the US dollar. At that time, the free market rate collapsed to 30,000 rials to the greenback and caused a massive backlash leading to major economic decline in 2013.

Read more here

hit tracker