Who is responsible for the fluctuation of the dollar exchange rate, Hezbollah or Farzin Afsar?
According to Iran Gate, the sharp increase in the dollar exchange rate after the operation in Al-Aqsa has caused great concern among many Iranian citizens. Many experts and currency market activists believe that as the situation in the Gaza Strip intensifies, the price of the dollar will increase even more. However, even if this war was not taking place, we should still expect a surge in the exchange rate in the market.
The price of the dollar in the Tehran free market, which had not seen the 50,000-toman channel for 5 months, fluctuated again with the sparks ignited in Palestine and the occupied territories. Now, two fundamental questions arise. First, will the price of the dollar experience further fluctuations with the escalation of the war in Gaza? The second question is whether the upward trend in the exchange rate in the Tehran free market will continue or stop if the war ends. This report attempts to answer these two questions.
Storm in Israel, earthquake in Istanbul intersection
The 7th of October 2023 will be an unforgettable day for the global public. Perhaps this day will never be forgotten, just like the Hamas attack on Israel is considered equivalent to the Islamic fundamentalists’ attack on the World Trade Towers and the Pentagon on September 11, 2001. However, just like what happened on September 11, 2001, this event caused a sudden surge in the dollar exchange rate.
In such a way that the dollar was traded at around 48,500 tomans before the Hamas attack on the occupied territories. But with the start of Operation Storm of Al-Aqsa, it experienced a lightning-fast growth of over 10%, reaching a price of 54,000 tomans. This price increase of over 6,000 tomans caused the queues for currency purchases to form again at Istanbul Square and Ferdowsi Square. The statements of government officials who supported this operation in Israeli territory added fuel to the fire that had already affected the market.
A cold shower on the body of the dollar.
The significant increase in the exchange rate of the dollar in the market only subsided after Ayatollah Khamenei’s speech on Operation Storm of Al-Aqsa. It was only minutes after the news of this speech was published by news agencies that we witnessed a decrease of about 3,000 tomans in the free market exchange rate. Market participants also believed that the leadership’s statements implied Iran’s avoidance of any confrontation with Israel. Therefore, we saw a decline in the currency price on October 10, 2023, influenced by the explicit positions of the Islamic Republic towards the Gaza war.
The flower bed that Raisi planted in Ferdowsi Square.
The downward trend in the exchange rate continued for two days after Ayatollah Ali Khamenei’s speech, to the point where the dollar rate fluctuated around 50,000 tomans. However, this trend did not persist as the contradictory and sometimes conflicting positions of the Iranian government officials caused serious uncertainties among market participants. These uncertainties reinforced the possibility of Iran entering into war and confrontation with Israel.
As a result, with each speech by Amir-Abdollahian and Ebrahim Raisi, the exchange rate once again entered an upward trend, fluctuating between 51,500 to 52,000 tomans. During this period, market participants and experts believed that if Raisi’s government did not express any opinion on issues related to the Israel-Hamas conflict, the exchange rate would definitely return to around 48,000 tomans.
The fire at Mohebani Hospital caused a significant loss of money.
Given the inconsistent positions taken by the officials of Raisi’s government, market participants expected that with another speech by the Supreme Leader of the Islamic Republic, the downward trend of the dollar exchange rate would resume. However, this did not happen because Ayatollah Khamenei took a strong stance contrary to his previous speech, practically threatening to open new fronts in the northern borders of Israel with Lebanon. As a result, the dollar exchange rate entered an upward phase again and returned to the 52,000-toman channel.
The heavy explosion at Al-Muadamiya Hospital in northern Gaza, which claimed more than 500 victims, also had an impact on the rising trend of the dollar price, to the extent that the dollar rate has stabilized around 52,500 tomans at the time of preparing this report.
Fereydoon or Hezbollah
As mentioned, the market has been heavily influenced by the possibility of a new front opening in northern Israel, a front that could serve as an opening for the Islamic Republic to engage in war with Israel, although there is no evidence of Hezbollah’s imminent entry into war and confrontation with Israel.
Mousa al-Marzouqi, a member of Hamas’ political office, also complained about Iran and said that Hamas had expected more from the Islamic Republic. All of these signals have made the currency market somewhat relaxed, but the occasional statements by government officials have shaken the Iranian rial and worried Iranian citizens.
However, many economists believe that the main reason for the sharp decline in the value of the rial is not the intensification of the fire of war in the Middle East, but rather the inflation rate of over 40% in the country. They believe that this high inflation has caused the rial to plummet with every blow and lose its value more than before. That is why experts and activists are not only waiting for Israel and Hezbollah’s decisions, but are actually waiting for the positions of the Central Bank of the Islamic Republic of Iran. Some believe that the fate of the dollar lies in the hands of Hassan Nasrallah and Benjamin Netanyahu, while others believe that everything is under the control of Mohammad Reza Farzin.
It seems that in the short term, the currency market will be affected by the developments in the Gaza war. However, in the medium term, there is a very high probability of witnessing a decline of more than 40% in the exchange rate within a year, which would mean breaking the record of the 70,000-toman exchange rate during the discussed period.
Persian
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