February 27, 2023 | Flash Brief

Iran’s Rial Drops to Record Low Against Dollar as Protests Persist

February 27, 2023 | Flash Brief

Iran’s Rial Drops to Record Low Against Dollar as Protests Persist

Latest Developments

Fresh protests erupted throughout Iran this weekend as the rial fell to its lowest rate yet against the U.S. dollar. According to Iran International, the strikers included bakers, steelworkers, retirees, and other professionals who are worried about how they can afford minimum necessities with a low exchange rate and high inflation.

On Sunday, the unregulated market exchange for the rial hit 601,500 to the dollar, beating records of 575,000 set on Saturday and 540,000 on Friday — a 20 percent drop in three days and a more than 50 percent drop since protests began in September.

Expert Analysis

“Iran’s foreign exchange market is dealing with both supply and demand crises. The supply crisis is the result of sanctions, limited access to export revenue, mismanagement, low economic growth, and structural problems in Iran’s exchange rate regime. The demand crisis is the result of persistent high inflation and widespread distrust in the government, its future, and its ability to manage the economy, which have led to an avalanche of demand for foreign currency as a tool to hedge against inflation and the rial’s depreciation.” Saeed Ghasseminejad, FDD Senior Iran and Financial Economics Advisor

Rial Reeling from International Pressure

The exchange rate in the unregulated market is highly affected by sanctions and prospects of sanctions relief. Prior to 2018, when the Trump administration pulled out of the 2015 nuclear deal, formally known as the Joint Comprehensive Plan of Action, the unregulated market rate for the rial was at 60,000 to the dollar. The fracturing of the nuclear deal put the rial on a four-year slide.

Until recently, the prospect of a renegotiated nuclear deal propped up Iran’s rial. It started falling as Tehran found itself more and more isolated, with international sanctions accumulating due to its human rights abuses and military partnership with Russia. As prospects for a new deal continue to fade away, the market is coming to terms with the fact that the rial will not have a bailout. In a thus-far failed attempt to stop the bleeding in the last few weeks, Iran’s central bank opened an exchange center to allow ordinary Iranians to purchase foreign currency and lifted its ban on private exchange shops that sell hard currency.

UN Sanctions Snapback Would Apply Needed Pressure

A snapback of United Nations sanctions could further exacerbate the currency slide and severely impact Iran’s financial system. This would achieve maximum pressure on the regime to halt its malign activities.

When an event triggers the rial to collapse, Tehran injects dollars from its reserves into the market to prop up its own currency. Since most of Iran’s reserves around the world are frozen, the regime is limited to its own foreign exchange reserves inside Iran. Those reserves continue to dwindle every time Tehran makes an injection. Thus, at some point, Iran is likely to run out of money. Alternatively, if Tehran readjusts its official exchange rate, it will send inflation skyrocketing, which could cause further protests against the regime.

Related Analysis

To Fight the Rial’s Plunge, Tehran Resorts to Tactics that Failed Before,” by Saeed Ghasseminejad

Cratering Economy Drives Iranian Rial to All-Time Low,” by Saeed Ghasseminejad

The Rial’s Fall Shakes Tehran,” by Saeed Ghasseminejad



Iran Iran Politics and Economy Iran Sanctions Sanctions and Illicit Finance