Title: A Month of Managed Volatility: Political Signals and Policy Steer Iran’s Currency Market
Article:
Aban, the eighth month of the Iranian calendar, presented a masterclass in managed volatility for the country’s foreign exchange market. The month was defined by three core themes: “guided fluctuations,” “sporadic precautionary demand,” and the “pronounced control of the market-maker.” While initial days saw an upward trend, a combination of targeted interventions and key political signals ultimately contained the fluctuations within a relatively narrow band, resulting in a modestly positive, yet policy-influenced, final yield for the currency market.
Market Overview: A Tug-of-War Between Policy and Politics
The currency market in Aban experienced significant fluctuations driven by a mix of political, managerial, and price expectation factors. The free market dollar opened the month at 108,900 tomans. After an initial retreat to a monthly low of 106,750 tomans due to market-maker intervention, the currency embarked on a decisive upward trajectory in the latter half, culminating in a monthly peak of 114,300 tomans on the 29th of Aban.
This peak coincided directly with developments surrounding the IAEA Board of Governors’ meetings, highlighting the market’s sensitivity to international political news. Overall, the free market dollar registered a 4.96% increase for the month, a gain largely concentrated in its final two weeks. Parallel markets, including the Herat dollar and the UAE dirham, followed a similar, synchronized path, reinforcing the broader upward trend.
Weekly Breakdown: From Artificial Calm to Political Surge
Week One: Initial Spike and a Managed Low
The first week was the most volatile. An initial surge, fueled by precautionary demand and regional uncertainties, was quickly countered. By the third of Aban, targeted supply and reduced speculative hype pushed the dollar to its monthly low of 106,750 tomans, demonstrating the market-maker’s capacity for swift intervention.Week Two: The “Artificial Sleep” and Tight Control
The second week was one of the calmest periods in recent memory. The market-maker successfully locked the dollar into a tight range between 107,000 and 108,000 tomans. This period of “artificial sleep” showcased complete control over the supply flow, with some days seeing identical opening and closing rates.Week Three: The Breakout and Shifting Expectations
The calm was shattered mid-week. Starting on Tuesday, the market-maker’s grip loosened, and the dollar broke free from its narrow band, beginning a three-day climb that took it to 113,000 tomans. This shift was fueled by domestic news, including discussions on potential gasoline price reforms and budget pressures, which amplified inflationary expectations.Week Four: Political Peak and a New Equilibrium
The final week saw the market reach its zenith. On the 29th of Aban, the dollar hit 114,300 tomans. This peak was directly attributed to the tense atmosphere surrounding the IAEA Board of Governors’ meetings, which spurred precautionary buying. During this phase, the market-maker appeared to reduce the intensity of its intervention, allowing the market to find a new equilibrium at a higher range.
Outlook for Azar: A Market Tethered to Politics and Policy
As the new month of Azar begins, the currency market’s trajectory remains heavily dependent on political and budgetary signals.
- On one hand, persistent inflationary expectations linked to the upcoming national budget, potential energy pricing policies, and scenarios of a budget deficit could push the market toward higher levels.
- Conversely, if the political atmosphere following the IAEA meetings becomes less tense and the market-maker resumes a policy of targeted control, fluctuations may be contained within a specific range in the early part of the month.
In a higher-risk scenario, any new developments regarding the nuclear dossier or financial restrictions could put significant pressure on key resistance levels. In summary, the market in Azar is expected to be highly sensitive, reactive, and news-driven, with its direction more tied to political and budgetary signals than purely economic data.
Source: Egtesad News