What are the reasons for the recent fluctuations in the country's foreign exchange market? This question is important in a situation where the exchange rate has reached 94,000 tomans in mid-August from 85,000 tomans in early August. The importance of these fluctuations becomes more prominent when we know that the exchange rate did not experience such rapid growth during the 12-day war and was in a stable range. Has a decision been made recently that the market has reacted in this way, or is there news going on behind the scenes of politics that the market has been informed of earlier? I think that in order to understand the conditions that the foreign exchange market is experiencing, we must examine the important economic figures. One of the important economic indicators that underlies any type of price increase in different sectors is the inflation rate. The inflation rate is a fundamental indicator that results from a wide range of developments. Some experts assess the recent developments in the exchange rate as a result of fundamental risks in the Iranian economy. Such issues as increased oil sanctions, the possibility of a snapback, expectations, etc. are among these fundamental risks. That is, on the one hand, there are fundamental economic issues such as liquidity growth, continuous inflation growth, trade deficit, and currency restrictions resulting from sanctions, and on the other hand, psychological factors and market expectations that put the dollar rate into a fluctuating environment. These rates were recorded while in the last days of the year the dollar rate had even rejected records of over 106,000 Tomans. However, with the policies implemented by the government, this rate retreated and reached the range of 80-85,000 Tomans. However, there are many reasons that the recent currency fluctuations are due to increasing inflationary shocks in the Iranian economy. In my opinion, the root of the increase in the exchange rate is rooted in inflationary shocks. My personal analytical assessments indicate that the point-to-point inflation, which was about 41.2% at the end of Khordad 1404 (June 1425), will reach about 45% without a war or a trigger mechanism, and the annual inflation at the end of 1404 will reach 40%. The Central Bank probably knows these facts better than us, so it probably intends to take measures that will lead to increased currency stability. But the problem is that the Central Bank’s sphere of influence is not wide enough to create a wide range of stability for a long-term period. Although the Central Bank has ultimate control over the exchange rate in the short term, in the medium and long term it is the inflation rate that determines the direction of the market situation.
If these statistics are to be deciphered, it should be noted that the amount of foreign exchange allocation in the Iranian economy over the past year has not only not increased, but also decreased. That is, we are facing a strict control of imports in the currency area. But based on 45 percent inflation, the average exchange rate, which was 82,000 tomans at the beginning of August, will reach 95,000 tomans in two weeks. This growth is completely based on the principles of economics. The Central Bank can delay this growth process for a while with control and circulars, etc. But in the long term, the market needs signs of real improvement. Ultimately, the average rate of 95,000 tomans will continue for the next 200 days. That is, a 10 to 15 percent growth is likely in the coming days. This is the end of the inflation rate that the Iranian economy will tolerate. With these explanations, I say that the roots of the growth of the exchange rate in the Iranian economy are due to inflation. Therefore, the government's most important priority should be to control the inflation rate. With this inflation rate, even if no new challenges arise in the next year, no war occurs, and no communication problems arise, the exchange rate will continue to rise. Unless a measure is devised to deal with this situation.
