20 September, 2014 / Ziqa'ad 24, 1435

Iran currency crashes 13 per cent to record low

Published Oct 01, 2012 12:06pm

Iran's currency, the rial, crashed more than 13 per cent in trade on Monday to a record low of 33,500 to the dollar. – AFP (File Photo)

TEHRAN: Iran's currency, the rial, crashed more than 13 per cent in trade on Monday to a record low of 33,500 to the dollar, according to the Mesghal.com exchange tracking website.

The dramatic freefall added to more gradual losses in past months that have seen the rial lose more than three-quarters of its value compared with the end of last year, when it was at 13,000 to the dollar.

Iran is suffering heightened geopolitical tensions over its nuclear programme and the effects of draconian Western sanctions which are hitting its economy.

It also is burdened with high inflation and rising unemployment.

The latest rate given by Mesghal extended a loss of nine percent seen immediately as trading opened on Monday, compared with Sunday's close of 29,600.

Some other websites that usually give real-time exchange data, such as Mazanex.com, had the dollar rate for the rial censored.

The plunge was hammering Iranian companies.

“It's a disaster,” a manager of a business in Iran's import sector told AFP on condition of anonymity. “A client lost one billion rials in one day” - the equivalent of $30,000 at the latest rate.

The Fars news agency, in a report on Sunday, said money changers in Tehran were hoarding dollars.

“We do not know what will happen in the coming days, we do not know what the government will do,” Fars quoted one money changer saying.

The official news agency IRNA quoted a spokesman for Iran's money changers' association, Nosrat Ezzati, as saying the latest rates for the rial “are artificial as no real exchange is happening in the market.”

But the rush out of the rial into more secure instruments could also be seen in Iran's property market, where prices have soared more than 30 per cent this year. Demand was outstripping supply, especially in prime urban centres.

“The property market is at a standstill. Very small properties get sold but not higher priced ones,” said a real estate agent in the prosperous northeast city of Mashhad who gave only his first name, Behrouz.

While Western sanctions curbing Iran's ability to export oil or to make financial transactions abroad were certainly having an impact, blame for the situation was also being put on economic mismanagement.

The government has in recent weeks excluded almost all importers from buying dollars at its official rate of 12,260 rials per dollar, encouraging them instead to use a new “exchange centre” where the rate was fixed daily close to the open-market rate. That has sharply increased consumer prices and spurred the rial's fall.

“This centre has helped accelerate the soaring dollar rate,” one economics columnist, Hirad Hatami, told AFP.

But he stressed “there is also the issue of speculation which currently stands at 2,000 to 3,000 rials - this is a bubble which is rooted in the operation of the exchange centre.”

Hatami said “we have to wait and give, say, a period of two weeks for the exchange centre to keep operating” to see if it succeeds in influencing the market.

Mahmoud Bahmani, the head of Iran's central bank, was quoted by the ISNA news agency as predicting: “The effects of the foreign exchange trading centre will gradually emerge in the free exchange prices.”

Ordinary Iranians were increasingly struggling with the currency crisis and the resulting inflation, which was officially put at 23 per cent even before the latest plunge of the rial.

“Prices are rising every day and it just doesn't stop,” said Khosro, a retiree who gave only his first name. He was forced to work as a taxi driver to boost his diminishing pension, he said.

Even locally made products were becoming more costly in Iran's supermarkets.

“The price of my toothpaste, a foreign brand, has tripled in just a few months. Now, I'm buying an Iranian one, but it has also nearly doubled in price,” said Maryam, a young shopper.


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Comments (1) (Closed)


malik
Oct 02, 2012 03:46am
Iranians need to tell their leaders to stop fighting the whole world and take care of their own country.