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Rial losing value yet again.

The rial tumbled in the days after the outbreak of anti-regime violence last month, losing a fifth of its value in four weeks before recovering slightly.

The Central Bank had an explanation for the rial's fall, and it had nothing to do with the disorder. The Central Bank told the public that exporters had failed to turn over all their required foreign exchange earnings to the market, thus causing a shortage in the foreign exchange supply that did not then meet foreign exchange demand.

That may well have been true. Exporters may indeed have withheld their foreign exchange earnings after the disorders erupted. It would be logical for them to think they could clear a much bigger profit if they just waited a few days. But the key to the fall in the rial was most likely the political disorder, since the rial lost value on the first day of trading after the rioting erupted--before any action by exporters would have an impact.

The rial had been remarkably stable in the 12 weeks before the outbreak of violence November 15. In that time, the rial basically cycled around in the range between 111,000 and 114,000 to the US dollar. The price never reached 115,000

But on November 16, the first trading day after the rioting erupted, the price not only passed 115,000, it passed 116,000, averaging 116,233 that day, according to Sanarate, the market reporting website run by the Central Bank.

It then continued to inch upward, reaching 117,877 on November 27, then lurching to 122,512 the next day and continuing up to 135,388 on December 11, 3-1/2 weeks after the rioting started, before settling a bit to 130,000 in mid-December.

Central Bank Governor Abdolnasser Hemmati said a group of exporters, who often tend to abuse the negative psychological climate, were responsible for the rial's loss in value. "Recent trends in the market are mostly due to the exporters trying to make use of the atmosphere after fuel prices increased. They are trying to sell their forex revenue from exports at higher prices," Hemmati wrote in an Instagram post.

Sticking to the same view, Albert Boghzian, an economist and market analyst recommended punitive measures against the defaulters.

"Exporters should be compelled to repatriate their earnings. If they fail to comply they should not be allowed to export," the state news agency quoted him as saying.

In his opinion, "The defaulters should be punished simply because, if their export earnings are not returned, it means that their export business is not in the interest of the country."

Four days later, on December 9, Hemmati gave a new analysis and provided five explanations for the loss in value: 1) the hike in gasoline prices; 2) speculation caused by suspicions that the government would have problems funding its budget; 3) foreign networks trying to drive down the value of the rial; 4) rising demand for foreign currency by Iranians clearing their debts to foreigners in the last month of the Gregorian year; and 5) continued unrest in Iraq, which reduced Iranian exports to that country.

While he mentioned unrest in Iraq, he did not mention unrest in Iran.

On November 5, 10 days before the rioting erupted, Hemmati had boasted that the value of the rial had improved 21 percent over the previous 12 months and linking that to what he said was Tehran's success in beating US sanctions.

Caption: Rial-Dollar Daily Market Rates
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Publication:Iran Times International (Washington, DC)
Date:Dec 20, 2019
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