Iranian businessmen and shopkeepers staged protests for a second day on Monday after the country’s currency plummeted to a record low against the U.S. dollar.
Videos on social media showed hundreds of people attending rallies on Saadi Street in central Tehran and in the Shush neighborhood near Tehran’s main Grand Bazaar, an area that played a crucial role in the 1979 Islamic revolution that toppled the monarchy and brought Islamists to power.
Traders closed their shops and asked others to do the same. The semi-official ILNA news agency said many businesses and merchants had stopped trading, although some kept their shops open.
Although security was tight at the protest, there were no reports of police raids, according to witnesses.
On Sunday, protest rallies were limited to two main mobile markets in central Tehran, where demonstrators chanted anti-government slogans.
Currency depreciates rapidly
The Iranian rial’s exchange rate plummeted to 1.42 million rials against the U.S. dollar on Sunday. On Monday, the rial exchange rate was 1.38 million rials against the dollar.
Exchange rates for the Iranian currency vary widely depending on whether official or free market data are used. On international foreign exchange platforms, the euro trades for about 49,000 rials, an exchange rate that reflects Iran’s tightly controlled official exchange system that is largely inaccessible to ordinary Iranians.
By comparison, the free market exchange rate widely quoted by local traders and international media is much weaker, with the euro trading at well over 1 million riyals (about 150,000 tomans), highlighting the gap between the exchange rate set by the state and the actual value of the currency in the market amid inflation, sanctions and capital flight.
Rapid depreciation has added to inflationary pressures, pushing up the price of food and other daily necessities and further straining household budgets, a trend that could be exacerbated by changes to gasoline prices introduced in recent days.
Relevant
Is hyperinflation coming?
According to the National Statistics Center, the inflation rate in December rose to 42.2% from the same period last year, 1.8 percentage points higher than in November. According to the statistics center, food prices have increased by 72% compared with December last year, and health and medical supplies have increased by 50%. Many critics see this ratio as a sign of coming hyperinflation.
Iranian state media reported that the government planned to increase taxes during the Iranian New Year period, which begins on March 21, causing further concerns.
The official exchange rate for Iran’s currency was 32,000 rials to the dollar when the 2015 nuclear deal was signed, which lifted international sanctions in exchange for tight controls on Iran’s nuclear program.
U.S. tensions weigh on economy
The deal collapsed in 2018 after U.S. President Donald Trump unilaterally withdrew from the agreement. There is also uncertainty about the risk of a renewed conflict following a 12-day war involving Iran and Israel in June.
Many Iranians are also worried about the possibility of a broader confrontation that could involve the United States, adding to market anxiety.
In September, the United Nations reimposed nuclear-related sanctions on Iran through what diplomats called a “snapback” mechanism. The measures again froze Iran’s assets abroad, halted arms deals with Tehran and imposed penalties on Iran’s ballistic missile program.