Back in November, when Iran was rocked by the worst protests in recent memory following the bungled implementation of a fuel price hike that raised the price of gas to 15,000 rials/liter from 10,000 overnight and established a monthly quota, we took a fresh look at the rial.
The currency had actually stabilized in the months prior to the protests, partially reversing the plunge that accompanied the Trump administration’s implementation of draconian sanctions on the country’s oil industry, which effectively stripped Tehran of its ability to source hard currency.
Inflation had come down in line with the rial’s stabilization, which was itself the product of marginally successful currency reforms.
(Parallel rate as of November 14)
Still, inflation was running high, and as we noted in November, it was possible the new energy policy could make things worse.
By December, the rial had depreciated to the weakest since early May, before strengthening back inside 130,000 per dollar by mid-month.
Well, as you can probably imagine, the death of Qassem Soleimani and the specter of more tension with the US has hit the currency, which depreciated anew over the last several days. It’s now at a fresh seven-month low against the dollar on the black market.
(Parallel rate as of January 6)
Normally, further weakness in the currency would serve to exacerbate social tensions to the detriment of the regime’s legitimacy, but under the current circumstances, it will likely be viewed as just another manifestation of what the theocracy is (successfully) billing as American cruelty.
If you’re wondering how things are going for Iranian stocks, the answer is that the TEDPIX looks to have fallen around 4.5% since Soleimani’s assassination. That’s according to the index’s somewhat ramshackle website.