Al-Monitor | Bijan Khajehpour: A recent devaluation of the rial on the so-called free market in Iran has raised concerns that the country�s economy will experience another collapse of the value of its�national currency�similar to what happened in 2012.�The free market rate of the US dollar surpassed the psychological mark of 40,000 rials in early October.�In early December the rate had reached rial 42,000.�In the same period, the official interbank rate, which is set by the Central Bank of Iran (CBI), went from�33,741 rials on Oct. 2 to�35,328 rials on Dec. 6 � close to a 5% drop in value.


The easy explanation for this phenomenon is that the devaluation was a psychological reaction to US President Donald Trump's outlining a new antagonistic strategy toward�Iran and his decertifying the Joint Comprehensive Plan of Action nuclear deal in October.�However, while political and psychological factors play a significant role, there are also other drivers that need to be understood.

The key stakeholder in the determination of the exchange rates is the�CBI, both because it governs monetary policy and�is the only buyer of the government�s hard currency revenues. Hence, it is also the main supplier of hard currency to the market, including the free market���that is,�foreign exchange bureaus.

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