The price of the dollar will reach 70,000 tomans this year.
According to Iran Gate, many believe that a time bomb has been placed in the heart of the currency market and they expect an imminent explosion that could increase the price of the dollar to the range of 70,000 to 75,000 tomans. This would make things even more difficult for low-income groups and ordinary people in the streets and markets.
The recent decrease in the exchange rate has raised the question for market participants whether it is possible for the price of the dollar to stabilize at 49,000 tomans or if we will face a sudden jump in the dollar rate. Many believe that the Central Bank intends to intervene in the market and suppress the dollar rate by injecting currency into the market if an agreement is reached with the West and access to foreign resources is obtained.
However, others believe that the United States will not provide such an opportunity for the Islamic Republic, and the Central Bank does not have the ability to implement such a program. But is there a possibility of a jump in the exchange rate to higher price ranges, or will the current recession in the market continue?
Where is the fuel for the dollar price coming from?
Let’s assume that in a country, the annual inflation rate is 10 percent, while the global price index of the dollar remains constant. Naturally, at the end of the year, the national currency should be worth 10 percent less against the dollar compared to the beginning of the year. However, this rule cannot always explain our situation because the intervention of governments in markets is always observable. Additionally, it should be noted that this intervention is more severe in governments like the Islamic Republic, where government intervention in the economy is continuous.
But it can be said that the fuel for the growth of the dollar’s price in the foreign exchange market always comes from the heart of the central bank and the country’s monetary system. The sole lever of this fuel is the inflation rate, which can indicate the hidden reality of the national currency’s value. This reality can significantly impact all equations and affect the livelihood of ordinary people in society, especially those with low incomes. That’s why it is said that what moves the exchange rate is the inflation rate and the country’s monetary policy, not the trend of nuclear negotiations or the transfer of blocked resources from one country to another.
Calculating the real price of the dollar
To calculate the real exchange rate of the dollar up until today, 24th of Mordad 1402, we need to delve into the statistics and inflation figures. Since Mordad month has not yet ended, we need to calculate the cumulative monthly inflation rate for the first four months of the year, which yields a figure close to 13%. Additionally, the global dollar index has also experienced approximately 3% growth, resulting in a total of 16% increase.
In other words, from the beginning of the year until the last day of Tir month 1402, the value of the Iranian rial against the US dollar has depreciated by around 16%. Therefore, to calculate the real value of the currency, we need to add 16% to the dollar price at the beginning of 1402. Since the exchange rate at the beginning of the current year was fluctuating around 49,000 tomans, we consider this figure as the approximate base price.
According to the aforementioned formula, the exchange rate at the end of Tir month 1402 should naturally be around 56,000 to 57,000 tomans. This is because, based on the same formula, the rial has lost 16% of its value against the US dollar in the first four months of the year. Therefore, approximately 8,000 tomans will be added to the base dollar rate in 1402. However, surprisingly, this figure is currently still fluctuating around 49,000 tomans compared to the beginning of the year.
That’s why it is said that the intervention of the government and the central bank in the foreign exchange market has been completely noticeable and has suppressed the price of the dollar. However, the real price of the dollar in the second half of August 2023, considering the continuous depreciation of the value of the rial, should be around 58,000 to 59,000 tomans.
Calculating the price of the dollar until the end of 2023
But the question arises as to what price range the dollar will fluctuate until the end of the current year. To answer this question, we must once again refer to the above formula, with the difference that we must also incorporate inflation expectations into these numbers and figures and include them in the calculations mentioned. The latest annual inflation rate published by the central bank at the end of last month indicates a 42% inflation.
Considering the coordinates observed from the Iranian economy, the most optimistic scenario for the second half of the year is that the inflation rate remains stable in this 42% range. However, other scenarios have been narrated by economists, which lead us to calculate both optimistic and pessimistic rates for the price of the dollar.
In an optimistic scenario, taking into account the annual inflation rate of 42% for the year 1402, we will reach a price range of 71 to 73 thousand Tomans by the end of this year. In other words, if the inflation rate does not decrease or increase, at the end of this year, each US dollar will be bought and sold in the Tehran free market for 71 to 73 thousand Tomans.
However, in a pessimistic scenario, economists believe that the inflation rate will stabilize at around 55 to 60% in the second half of the year due to the record-breaking share of money from liquidity. Therefore, in the pessimistic calculation, we consider a 55% inflation rate. In this case, we will reach a figure of 76 to 77 thousand Tomans for the price of the dollar at the end of the year 1402.
It is expected that if the government and the central bank do not attempt to manipulate the dollar exchange rate in the free market, the dollar will end up in the range of 70 to 77 thousand Tomans in the year 1402.
How far will the dollar price fall?
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