There are also other factors that need to be taken into account: On the one hand, hard currency has always been a hedging mechanism for many small and large investors and any sudden rate change caused by internal and external factors leads to a surge in demand for hard currency. On the other hand, one should not underestimate the impact of seasonal demands for hard currency, including demand connected to a growth in foreign travel — the most recent one being the massive pilgrimage of Iranians on and around Arbaeen.
Of a longer-term nature is the impact of the gradual opening of banking channels with Iran that will allow the CBI and other banks in general to repatriate their foreign holdings. This, combined with the fact that Iran is generating higher oil and gas export revenues, will be seen as a positive factor in the determination of the rial’s value in the short to medium term.
While the various factors and schools of thought will continue to influence exchange rates in Iran, it is valid to project that the interbank rate of the rial will be adjusted based on the inflation differential between Iran and the United States (estimated to be 8% in 2018). As such, though a CBI intervention may bring the rate down slightly, the US dollar’s free market rate does not seem to go below 40,000 rials anymore.
An adjustment by the mentioned inflation differential means that the interbank rate would move to 38,000 rials in the second half of 2018, which would push up the free market rate (usually about 15% higher than the official rate) to about 44,000 rials in the same period.