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DUBAI: The Iranian rial tumbled 5 percent to an all-time low against the U.S. dollar yesterday, suggesting a fresh effort by the government to stabilise the currency may have backfired.
The rial was trading at 26,500 to the U.S. dollar on the open market yesterday afternoon, according to currency tracking website Mazanex, compared to a closing price of 25,200 rials on Monday. The Iranian currency has lost more than half its value in the past year because of US and European sanctions against the country’s banking sector and oil exports, aimed at forcing Tehran to give up its disputed nuclear programme.
Iranians have rushed to informal money changers to convert their savings into hard currencies, accelerating the rial’s slide. The fresh drop yesterday followed the government’s launch on Monday of a foreign exchange centre that provides importers of some basic goods with dollars, at a rate about 2 percent cheaper than the open market rate on a given day. The announced rate at the centre yesterday was 23,620.
Officials said they would use proceeds from Iran’s sales of oil and petrochemicals to supply dollars to the centre, which would reduce pressure for the rial to fall as importers’ demand for hard currency was satisfied.
However, the scheme may have backfired because most importers of basic goods now have to buy dollars from the centre at a rate which is close to the open market rate and linked to its volatile movements.
Earlier this year the government told importers of basic goods they could buy dollars at a fixed rate of 12,260 rials, but it has provided only a limited amount of hard currency at that level.
A money-changer in north Tehran said he had stopped selling dollars because of the volatility. “It’s natural that if importers’ rate goes up, the open market rate will go up too,” he said.
Iran’s oil-dependent economy was showing the strain of punishing Western sanctions as thousands of workers publicly complained of unpaid wages, importers struggled to pay for goods, inflation climbed and travel agencies bemoaned a rapidly shrinking pool of travellers able to afford to go abroad.
Iran’s government and ordinary citizens alike were struggling with the sanctions, with food costs notably soaring. The ILNA news agency reported that a letter on behalf of 20,000 workers from across the country was sent to Labour Minister Abdolreza Sheikholeslami complaining they had not been paid and demanding an increase to their salaries of $120 to $285 a month that they said were “way below the poverty line”. Reuters/AFP