Last Updated: Mon Oct 01, 2012 13:10 pm (KSA) 10:10 am (GMT)

Iran currency crashes 9% to record low

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

Iran’s currency, the rial, plunged nine percent to a record low of 32,500 to the dollar in early trade on Monday, before real-time data given by some exchange websites were censored.

The freefall in the open market exacerbated a slide seen over this year that accelerated last month. Monday’s crash was unusually deep, even by that standard.

Since the end of last year, the rial has lost 75 percent of its value.

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

Minutes after the dramatic plunge was posted, the exchange data on some websites such as Mazanex.com were censored.

The ISNA news agency, however, reported the 32,500 rate, and the Mehr news agency and the exchange tracking website Mesghal.com reported the rial trading at 32,300 to the dollar.

That was sharply lower than the close of trade on Sunday, when the rial exchanged at 29,600 to the dollar. At the end of last year, the rial fetched around 13,000 to the dollar.

The new rate 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. One exchanger bought $2,000 in greenbacks from one customer, but “did not sell any” when another customer tried to purchase some.

“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. Demand there was high as investors sought to buy solid assets, but supply in prime urban centers was scarce.

“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 transaction abroad were certainly having an impact, blame for the situation was also being put on economic mismanagement.

A new “exchange center” the government set up last week that set a rate it hoped the rest of the market would follow had so far failed to stem the slide, some Iranian pundits said.

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

But he stressed that “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 center.”

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

Comments »

Post Your Comment »

Social Media »