Iranian rial plummets to record low

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Iranian currency suffered from unprecedented devaluation over the last few months due to US-led economic sanctions and speculation by currency traders. Photo – Reuters

Reports coming from Tehran on Sunday said Iran’s currency slid to a new record low against the dollar, with the central bank saying it was trying to manage the plunge amid an “economic war with the world.”

According to specialised websites giving real-time rates, street traders were exchanging one dollar for more than 24,000 Iranian rials.

That was a plunge of some 5% over Saturday’s rate and around 10% since last Wednesday, when President Mahmoud Ahmadinejad admitted on state television that Western sanctions were causing “problems” in exporting oil and international financial transactions.

The latest street rate was nearly double the fixed, official rate of 12,260 rials that the government reserved for its agencies and a few privileged businesses.

Iran’s rial has lost around half its value this year. It started to plummet in January after the European Union and United States announced draconian sanctions that came into effect in July.

Although authorities have in recent months intervened to stop the slide – even briefly at one point trying to impose a cap on the rate – the rial has returned to shedding value.

The depreciation has added to inflation, which the central bank puts at 23.5% but which outside observers say is much higher. Food and imported goods have become much more costly.

“The central bank cannot systematically lower the exchange rate, but we have attempted to control it,” Central Bank chief Mahmoud Bahmani told reporters, the ISNA news agency reported.

“Our situation is one of war. We are fighting an economic war with the world,” he said.

Iran’s authorities have vowed not to cede to the sanctions pressure, saying they will maintain their nuclear activities they insist are purely civilian in nature.

EU foreign ministers meeting in Cyprus on the weekend said they were considering imposing further sanctions on Iran, voicing frustration at negotiations with the Islamic republic that have all but stalled.

The so-called P5+1 group comprising the five permanent UN Security Council members plus Germany suspect that Iran may be trying to develop a nuclear weapons breakout capability.

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