High time: Iranian Rial Plummets to 145,000+ per US Dollar
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High time: Iranian Rial Plummets to 145,000+ per US Dollar

By IndraStra Global News Team

Image Attribute: Iranian riyal / Source: Ivar Husevåg Døskeland/Flickr, Creative Commons

Image Attribute: Iranian riyal / Source: Ivar Husevåg Døskeland/Flickr, Creative Commons

In the past three days, the rial has lost around 15 percent of its value on the open market, according to Bonbast.com, which tracks Iran's rates it is trading at 145,000 to $1 by September 5 (it was trading 128,500 to $1 on Monday). The dramatic 70 percent decline of the rial over the past year, combined with rising prices triggered protests across the country since the turn of the year uprising that rocked Iran.

The drop followed a speech by central bank governor Abdolnaser Hemmati on Saturday, in which he announced tighter restrictions on allocating foreign exchange reserves, said financial journalist Maziar Motamedi.

Iran’s official exchange rate, set by the Central Bank of Iran (CBI), has stood at 42,000 to the dollar since April 2018. But in an unregulated market, Rial was 60,000 to the dollar during the same month. Iranian authorities initially warned they would punish currency exchange houses trading in dollars above that rate. But, the Central Bank partially lifted its ban on unofficial exchange rates last month to try to ease panic buying of the U.S. currency, eventually leading the government to sack the central bank chief and reverse the April measures.

The new foreign exchange policy announced by President Hassan Rouhani’s administration on August 7 mitigated the situation and pushed the dollar’s value below 100,000 rials, but only for a few days. When President Rouhani took power in 2013 a dollar bought 36,000 Iranian rials.

Earlier in August 2018, United States (U.S.) re-imposed a first-round of sanctions against Iran over Tehran's alleged failure to abide by a nuclear deal. The new sanctions are the outcome of President Donald Trump decision to withdraw the US from the JCPoA a.k.a Joint Comprehensive Plan of Action (JCPoA), stunning allies who had negotiated the diplomatic milestone.

At the outset of re-imposed sanctions and prevailing financial conditions in the country, Iranian lawmakers summoned President Rouhani before parliament in late August, marking it to be the first time since he assumed office in 2013.

In the parliament, he made a startling statement, "the economic problems are critical but more important than that is that many people have lost their faith in the future of the Islamic Republic and are in doubt about its power." Rouhani also informed the parliament that he had ordered the CBI not to use oil revenues to support the rial.

The current conditions are creating huge pressure on Rouhani administration. The declining currency has led to higher inflation, with most necessities substantially becoming more expensive for the people, who have been frustrated by dire economic conditions including high unemployment and a soaring cost of living. Besides that, the pressure is also building up from hardliners and even some in his reformist camp to reshuffle his cabinet over widening economic fallout from the US sanctions.

It's high time for the Iranian government to intervene in the markets by opening up the "oil-revenue tap" to ease down the tension build-up.

With reporting by AFP, Asia Times, Bonbast.com, and RadioFarda