Iran's rial traded at 1,877,500 to the dollar on the free market on Thursday 6 August, roughly 2.5 per cent stronger than a week earlier1. That reverses a run of losses that took the currency to 1,933,000 on 30 July, when Tehran was re-tiering its petrol subsidy and the exchange rate was setting new lows almost weekly.
The free-market rate, quoted by Tehran's currency dealers rather than the central bank, is the number ordinary Iranians actually transact at. Importers buy wheat, animal feed, spare parts and pharmaceutical inputs against it, and those prices reach shop shelves within weeks. Iranians also read the rate politically, as a running scoreboard on whether the government is finding a way out.
Tehran's dealers moved the rate on an expectation rather than a receipt. Nothing has been signed, no oil has moved through a reopened route, and no sanctions relief has been granted. A currency that rallies on the prospect of an agreement will surrender the gain if the agreement stalls, and Iranian household budgets have already absorbed a subsidised petrol ration cut from 70 litres to 50 with no cushion left for a reversal.
