How Far Will the Dollar’s Price Fall

How far will the dollar’s price fall?

How far will the dollar’s price fall? According to Iran Gate, after the speech by Seyyed Ali Khamenei, the leader of the Islamic Republic, on Sunday, June 11, 2023, the dollar’s price dropped by more than two thousand tomans. Observations indicate the formation of queues for selling foreign currency in Ferdowsi Square and Istanbul Crossroad.

It was almost from the early days of June 2023 that the decline in the dollar’s price in the free market began. The rate gradually retreated from the 55,000 toman range to 52,000 tomans. Suddenly, and coinciding with the news of prisoner exchanges between Iran and Western countries, this price reduction intensified, and for the first time this year, the dollar was traded in the 40,000 toman range.

However, this price reduction intensified more from noon on Sunday to the extent that each US dollar was traded at a rate as low as 46,000 tomans, but then returned to the 47,000 toman range. In other words, the market believed the news of an imminent limited agreement after the leader of the Islamic Republic’s speech, which led to a sharper downward trend in the currency rate.

How far will the dollar drop?

As mentioned, the currency market and its participants have taken the news of a potential agreement seriously. Now, if the most optimistic scenario of the agreement, which could mean the release of $24 billion from Iran’s blocked resources, occurs, how far will the currency rate fall?

To answer this question, it must be understood that the current drop in the dollar’s price is entirely due to the existing market excitement. Market participants have accepted that an economic opening will occur. If the best and most optimistic scenario in this area becomes reality, it can be expected that in the short term, the dollar’s rate could decrease to the 42,000 toman range.

In other words, if the West, particularly the United States, allows the mentioned $24 billion to be provided to Iran in cash, it is highly likely that Ebrahim Raisi’s government will flood the market with currency. For this reason, analysts believe there is a possibility for the currency rate to fall to the 42,000 toman range.

However, even if this scenario is implemented, it must be known that this price reduction cannot be sustainable due to the still very high inflation rate. Experts believe that if this scenario occurs, the dollar’s rate will fluctuate in the 42,000 to 45,000 toman range for about two months, but it is expected that after this two-month period, the price spring will once again unwind, and the dollar’s rate will enter an upward channel.

The price ceiling for 2023

Assuming that Ebrahim Raisi’s government has access to the blocked currency resources and the dollar’s price falls to the 42,000 toman range, experts still believe the currency rate will enter a rising phase again. According to currency market analysts, when the current inflation rate fluctuates around 70%, expecting the rial to strengthen against the dollar is neither logical nor natural.

Therefore, it is said that a maximum two-month period of decreasing fluctuations for the dollar’s price can be predicted, but these fluctuations cannot be sustainable. In other words, it is expected that after the mentioned two-month period, we will once again face a rise in the dollar’s price. Calculations shared by experts on social networks indicate that new price ceilings will be reached in the currency market. That is, if the government cannot turn off the inflation engine and stop printing money, it is certainly expected that the currency rate will return to the 50,000 toman price range and even reach the 60,000 to 62,000 toman range by the end of this year.

If there is no dollar

The points and analysis provided so far have all been based on the assumption that the promises and news published by media close to the government are true. But if these news are not true and the $24 billion is not provided to the Islamic Republic, what fate can be imagined for the dollar?

As mentioned, the current price drop in the currency market has been caused by news shocks. Now, if we assume that the market concludes that the published news does not have roots in reality, the situation for the government and the Central Bank will be much more complicated than the current state. Experience has shown that when the market becomes divided and loses trust in the government, after a price drop, it will enter an upward phase again, breaking past price ceilings with much more speed and intensity.

Experts believe that if the second scenario occurs, we should expect the dollar’s rate to return to the 60,000 toman range within a maximum one-month period, in such a way that this time, each US dollar may be traded around the 65,000 toman rate in just 3 to 4 weeks.