The price of the dollar will reach 70,000 tomans this year.
The price of the dollar will reach 70,000 tomans this year. According to Iran Gate, many believe that a time bomb has been planted in the heart of the currency market, and they are expecting its imminent explosion. An explosion that could increase the dollar’s price to the range of 70 to 75 thousand tomans, making life harder for low-income groups and ordinary people in the streets and markets than ever before.
The recent decline in the exchange rate in recent days has raised the question among currency market activists whether the dollar’s price might stabilize in the 49,000 toman range or if we will face a sudden jump in the dollar rate. Many believe that the Central Bank intends to flood the market with currency and suppress the dollar rate if an agreement with the West is reached and access to currency resources is obtained.
However, others believe that the United States will not allow such an opportunity for the Islamic Republic, and the Central Bank does not have the capability to implement such a plan. But is there a possibility for the currency rate to jump to higher price channels, or will the current market stagnation continue?
Where does the dollar’s price fuel come from?
Suppose in a country the annual inflation is 10 percent, while the global dollar index remains stable. In this country, at the end of the year, the national currency’s value should naturally be 10 percent less against the dollar than at the beginning of the year. However, this rule cannot always lead us to the answer because the government’s interventionist hand is always visible in the markets. On the other hand, it should be noted that this intervention is more intense in governments like the Islamic Republic, where the government’s role in the economy is unceasing.
Overall, it can be said that the fuel for the dollar’s price growth in the currency market is always supplied from the heart of the Central Bank and the country’s monetary system. Its sole lever is the inflation rate, which can reflect the underlying reality of the national currency’s value. A reality that can change all equations and affect the livelihood of ordinary society members, especially low-income groups. That is why it is said that what moves the exchange rate is the inflation rate and the country’s monetary policy, not the course of nuclear negotiations or the transfer of blocked resources from one country to a third country.
Calculating the real price of the dollar
To calculate the real dollar rate up to today, August 15, 2023, we must rely on inflation statistics and figures. Since August is not over yet, the total monthly inflation rate for the first four months of the year must be calculated, which yields a figure close to 13 percent. On the other hand, the global dollar index has also grown by about 3 percent, bringing the total to 16 percent.
In other words, from the beginning of the year to the last day of July 2023, the value of the rial against the US dollar has lost about 16 percent of its value. Therefore, to calculate the real currency price, 16 percent should be added to the dollar price at the beginning of 2023. Since the exchange rate at the beginning of the current year was fluctuating in the 49,000 toman range, we consider this figure as the approximate base price.
According to the formula mentioned above, by the end of July 2023, the exchange rate should naturally have been equivalent to 56 to 57 thousand tomans, because according to the same formula, in the first four months of the year, the rial lost 16 percent of its value against the US dollar. Therefore, approximately 8,000 tomans will be added to the base dollar rate in 2023. However, surprisingly, this figure is still fluctuating in the 49,000 toman range without change compared to the beginning of the year.
That is why it is said that the interventionist hand of the government and the Central Bank in the currency market has been quite noticeable and has suppressed the dollar price. However, in any case, the real dollar price in the second half of August 2023, considering the ever-decreasing value of the rial, should be around 58 to 59 thousand tomans.
Calculating the dollar price until the end of 2023
But the question arises as to what price range the dollar rate will fluctuate in by the end of the current year. To answer this question, we must once again refer to the above formula, with the difference that inflation expectations must also be added to these numbers and figures and included in the mentioned calculations. The last annual inflation rate published by the Central Bank at the end of last July indicated a 42 percent inflation.
Given the characteristics observed in Iran’s economy, the most optimistic scenario for the second half of the year is that the inflation rate stabilizes in this 42 percent range. However, other scenarios have also been narrated by economists, which lead to calculating two optimistic and pessimistic rates for the dollar price.
In the optimistic scenario, considering the annual inflation rate of 42 percent for 2023, we will reach a price of 71 to 73 thousand tomans by the end of the current year. In other words, if the inflation rate does not decrease or increase, by the end of the current year, each US dollar in the Tehran free market will be bought and sold for 71 to 73 thousand tomans.
But in the pessimistic scenario, economists believe that the inflation rate in the second half of the year, due to the record-breaking share of money from liquidity, will stabilize in the 55 to 60 percent range. Therefore, for calculating the currency rate in the pessimistic scenario, we consider a 55 percent inflation rate. In this case, we will reach a figure of 76 to 77 thousand tomans for the dollar price by the end of 2023.
Overall, it is expected that if the government and the Central Bank do not attempt to manipulate the price by suppressing the dollar rate in the free market, the dollar will end 2023 in the 70 to 77 thousand toman range.
How far will the dollar price fall?
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