Iran’s Currency Market Navigates Diplomatic Currents and Domestic Policy
Recent days have seen Iran’s foreign exchange market experience significant fluctuations, highlighting its acute sensitivity to international diplomatic and political developments. The US dollar’s value, a key indicator for the national economy, crossed the 107,000 toman mark, setting a new record in unofficial trading and reflecting heightened inflationary expectations and investor reaction.
A Market Reacting to Headlines
This sudden surge demonstrated the direct impact of international news and foreign policy decisions on market sentiment. However, an equally sharp decline, which pushed the dollar’s value back below 100,000 toman, underscored the powerful role diplomatic progress can play in shifting market direction. Traders and investors now operate in an environment where any new political or economic development can alter the fragile balance of the currency market, creating a climate of simultaneous uncertainty and anticipation.
The “Trigger Mechanism” and Psychological Pressure
In recent weeks, the dollar climbed from approximately 85,000 toman, a rise experts attribute largely to psychological factors. Increased concerns surrounding the potential activation of the so-called “trigger mechanism” and external political pressure led economic actors to seek cover by purchasing foreign currency and gold. As financial market expert Shayan Arani noted, “Capital exited the stock market, which itself fueled demand in the foreign exchange market.”
This trend reversed with news of an agreement between Iran and the International Atomic Energy Agency (IAEA), which increased selling pressure and caused the dollar’s value to fall in unofficial trading. A concurrent drop in the value of Tether and other cryptocurrencies confirmed a decline in real demand for dollars, signaling a shift from an emotional trading environment to one of more cautious expectation.
Domestic Economic Factors at Play
Alongside international factors, domestic economic conditions have played a decisive role in currency volatility. Financial analyst Javad Fallahian pointed to the continuous growth of the monetary base and liquidity, noting that government policies to curb it have not yet yielded the necessary results. He emphasized that even in the event of an international agreement, this internal driver would continue to exert upward pressure on the dollar’s exchange rate.
Fallahian described the recent fluctuations as a “price respite,” predicting that without a major shift in foreign policy or macroeconomic management, the growth of the exchange rate could intensify from the late autumn months.
Path to Stability and the Central Bank’s Role
After its initial decline, the dollar once again trended upward, passing the 103,000 toman level. Analysts believe the market has yet to achieve stable equilibrium and that rates remain in a fragile range. “While some concerns have subsided and the exchange rate has returned to the 100,000 toman range, stabilizing this level is heavily dependent on the outcomes of political negotiations,” explained Arani.
He also noted that the Central Bank’s established and confidential tools, including open market operations and foreign currency supply, can play an effective role in managing fluctuations, though their impact would be most tangible alongside a reduction in political tensions.
Outlook Tied to Diplomacy and Policy
Analysts concur that the dollar’s future trajectory remains subject to two main factors: diplomatic developments and domestic monetary and banking policies. In a positive scenario, the continuation of international negotiations and engagement could reinforce a decrease in the dollar’s rate toward the 98,000-100,000 toman range. Conversely, should external tensions increase, a rapid return to higher values is possible.
The market’s recent performance has demonstrated that, more than any other economic variable, it is influenced by political developments and psychological expectations. While diplomatic progress can bring temporary relief, the market’s future path remains inextricably linked to the continuity of political engagement, effective liquidity management, and the prudent use of central banking tools.
