Iran’s currency, which has plunged to about half its value against the dollar since last year, reached 29,600 rials against the greenback in street trading today, a week after the government opened an exchange center in an effort to stabilize the market.
The rial’s value has dipped again in past days. It traded at 27,200 to the dollar on unofficial markets on Sept. 27 from 26,500 two days earlier, according to state-run Mehr news reports last week. Today’s street exchange rate is more than twice the official rate set by the Central Bank at 12,260 rials to the dollar, a rate that most Iranians don’t have access to.
Iran’s economy is suffering as a result of financial and trade sanctions imposed by the U.S. and the European Union to discourage what they say is the Persian Gulf country’s pursuit of atomic weapons. Iranian officials reject the allegations and say the nuclear program is solely civilian. The currency has been declining since last year when it traded at about 13,200 on Nov. 2.
As inflation accelerates and erodes the value of rial savings, Iranians have turned to dollars, which they consider a less volatile currency. Iran’s inflation rate rose to 23.5 percent in the month that ended on Aug. 20 from 22.9 percent the previous month, according to the central bank.
Iran opened a new currency exchange center, under the supervision of the central bank, last week with the intention of stabilizing the market. It enables importers of essential goods including medicines, meat and grains to access dollars at the reference rate of 12,260 rials. Importers of some basic goods, such as raw material and essential industrial and agricultural equipment, may purchase dollars at a rate 2 percent below street trading levels.
“Foreign currencies will be provided to buyers who fulfil the requirements, at a lower rate than street rates,” Minou Kianirad, the bank’s deputy governor for foreign-currency affairs, was cited as saying in a Sept. 23 report published on state television’s website. “This will no doubt have an impact on market prices.”
Recent fluctuations in the currency market are due to the “market’s resistance” but it will “soon give in,” Central Bank governor Mahmoud Bahmani was cited as saying, the Donya-e-Eqtesad newspaper reported today.
“The impact of the new currency exchange center will be clear within 15 days,” Kianirad was cited as saying, the Tehran-based newspaper reported.