Exchange rates are among the most important economic indices that have a big influence on the level of imports and exports, domestic and international markets, and inflation. On the other hand, exchange rates are affected by many highly correlated economic, political and even psychological factors. The interaction of these factors is in a very complex fashion. Therefore, forecasting the changes of foreign exchange rates is generally very difficult. However, obtaining a precise prediction of exchange rate can be very useful for investors and government. In this paper, we consider monthly exchange rate between the Iranian Rial (IRR) and the US Dollar (USD). Since the beginning of 2018 IRR has depreciated by nearly 70 percent against its benchmark. Most experts believe this situation as the effect of rising tensions in US-Iran relations, particularly the USs withdrawal from the landmark 2015 Iran nuclear deal. However, we believe that there is a strong cyclic behavior in IRR. We guess such behavior is due to the presidential change in Iran. In order to assess our proposal, we examined the predictability of IRR/USD in long- run using monthly data over the period 1981 to 2018. A preliminary analysis of the original time series reveals a strong positive trend. For further analysis, we adjusted the original time series for each presidential term by dividing exchange rate to the first value of that period. The new time series reveal a strong negative trend and harmonic components with frequencies 4 and 8 years. As a conclusion, the results confirm that IRR/USD is predictable in long-run.
