Iranian Riyal nosedives as sanctions hit
Iran's currency, the rial, dived six per cent to a new low of around 28,600 to the dollar in open trading yesterday, deepening a month-long sell-off, according to exchange tracking websites.
The new rate was sharply lower than the 26,900 rials per dollar fetched on Thursday, the last day of trading. The plunge - and a steep rise in the price of gold bought in Iran - suggested Iranian families and companies were rushing to convert their money to dollars, other foreign currency and precious metals because of economic uncertainty. The rial has lost over 60 per cent of its value since the end of last year, as draconian Western economic sanctions take effect.
That has spurred already high inflation to even greater heights, with food costs soaring more than 50 per cent. Speculation of military action against Iran by Israel, with or without the help of its ally the United States, has grown in the past couple of months. Israeli Prime Minister Benjamin Netanyahu, in a speech Thursday to the UN General Assembly, implied action would have to be taken against Iran before the middle of 2013 if it continues with its nuclear activities at the current rate.
Iran, which denies Israeli and US allegations that it has nuclear weapons ambitions, has made some efforts to mitigate the weakening of the rial, but to little durable effect. The head of Iran's central bank, Mahmoud Bahmani, predicted yesterday that the rial's slide would be halted once the market realised the country "has enough (foreign) currency in reserve."
This week Iran opened an "exchange centre" which puts importers and exporters in touch which each other to arrange informal swaps of currency aimed at skirting US financial restrictions that curb the ability to repatriate money to Iran. (Follow timesofoman.com on Facebook and on Twitter for updates that you can share with your friends.)