In the foreign exchange market, stability is often observed. When the dollar stops climbing, observers look to the Central Bank of Iran (CBI). According to Sina Mardavi, a monetary and banking expert, the current stability is not the result of central bank policy. Mardavi argues that the current plateau in the dollar’s value against the rial is a result of market factors and the central bank is not trying to stabilize the dollar.
At the heart of the current debate is the price point of 263,000 tomans per dollar. Mardavi stated, "The notion that the halt in the growth of the dollar’s price is the result of Central Bank intervention to establish a floor in the range of 263,000 tomans has no solid foundation." He insists that the current stability should not be interpreted as evidence of the central bank’s resolve to protect prices at this level. The central bank is not committed to maintaining current prices as a support level but is allowing the market to correct itself.
Mardavi points out that the recent calm is due to market factors. "This situation is the result of the subsiding of political hysterias more than anything else arising from economic components," he noted. As the wave of hysteria subsides and demand retreats, transactions are now flowing more among dealers. The stability we see today is the result of market forces rather than central bank intervention.
For individual investors, the implications of this analysis are significant.
For individual investors, the implications of this analysis are significant. Entering the free market at current rates, particularly around the 263,000-toman range, is highly risky. Mardavi notes that buying at the current price, in conditions where the policymaker has given no commitment to supporting free market rates, can impose heavy losses on buyers.
Mardavi highlights the potential for a significant drop in the exchange rate. Investors who enter the market at current levels face risks, with potential losses for investors reaching up to 50 percent. The central bank is allowing the market to correct itself, consistent with historical experiences where the bank does not engage in currency stabilization.