Foreign exchange rates in Tehran have finally begun to ease after two weeks of sharp increases, with the US dollar slipping by 1.4% and being traded at 551,500 on Ferdowsi Street. 

The dollar's price decline follows a reduction in a possible direct US strike on Iran, with markets gaining confidence as tensions between Tehran and Washington remain extra-territorial. Exchange rates had been climbing steadily in Tehran's free market, especially after a drone attack that resulted in the deaths of three American soldiers in Jordan. US President Joe Biden attributed the attack to Iran-linked militants and pledged a corresponding response and has responded in kind, killing dozens in Iraq and Syria aligned with Iran.

Mohammad Reza Farzin, Governor of the Central Bank of Iran (CBI), assured private sector representatives that the plan to issue certificates of deposits would proceed as planned, as he had promised earlier to steer buyers away from street dollar purchases.

In a meeting on February 4, Farzin informed businesses that the CBI had flooded the market with dirham and euro in recent days, anticipating a recovery in the rial's value.

The Governor said that the reason for the dollar rate increase is political conditions, and if political tensions subside, the currency rate in the market will “definitely decrease.”

Informal street hawkers on Ferdowsi corroborated this, affirming that the CBI had injected significant amounts of Emirati dirham into the market, which is expected to continue impacting the dollar in the days ahead.

The dirham (pegged to the dollar) experienced the most notable decline in the Tehran market, dropping by 2.5% compared to the previous day's closing rate, cooling suspicions currency dealers in border markets like Dubai were controlling the earlier rial's plummeting value.

On February 4, the CBI reversed its decision to offer a certificate of deposits with a 30% return. Despite plans to continue the offer until Wednesday, most banks informed applicants that the scheme had been terminated.

The Central Bank had authorised banks to offer certificates of deposits with a 30% interest rate, nearly 7% higher than the cap on long-term deposits. The move aimed to draw liquidity away from foreign currency demand. However, reports indicate that most customers converted their long-term deposits into these certificates.

Farzin also announced that the Iran Centre of Exchange is poised to introduce new foreign currency instruments, including forwards and salaf contracts, which are expected to bolster the central bank's control over market rates.