Mobile  |  About us  |  Photos  |  Videos  |  Subscriptions  |  RSS Feeds  |  Today's Paper  |  Classifieds  |  Contact Us
The Daily Star
MONDAY, 21 APR 2014
05:19 AM Beirut time
Weather    
Beirut
17 °C
Blom Index
BLOM
1,214.01down
Middle East
Follow this story Print RSS Feed ePaper share this
Iran riyal sinks 5 percent against dollar amid devaluation fears
Reuters
FILE - In this Thursday, Oct. 30, 2008 file photo, an Iranian money changer holds currency with Ayatollah Ruhollah Khomeini's image in Tehran, Iran. (AP Photo/Hasan Sarbakhshian, File)
FILE - In this Thursday, Oct. 30, 2008 file photo, an Iranian money changer holds currency with Ayatollah Ruhollah Khomeini's image in Tehran, Iran. (AP Photo/Hasan Sarbakhshian, File)
A+ A-

DUBAI: Iran’s riyal sank about 5 percent in trading against the U.S. dollar Monday after the central bank said it would change the currency’s official exchange rate, prompting fears of another devaluation as the economy suffers from international sanctions.

The riyal was trading in the free market at around 21,510 per dollar, according to Persian-language currency tracking website Mazanex, down from about 20,440 Sunday.

Most dealers in Tehran’s major currency trading district stopped selling dollars Monday and removed signs from windows advertising their rates, Mehr News Agency reported. It said the riyal fell as low as 22,000 before partly recovering to 21,400.

Central bank Governor Mahmoud Bahmani said Sunday he would announce a change to the government’s “reference rate” of 12,260 riyals to the dollar “within the next 10 days,” Iranian media reported.

He did not elaborate, but Iranian media speculated the new reference rate might be between 15,000 and 16,000 riyals. Most Iranians are unable to obtain dollars at the official rate and must instead use the free market, which is far more expensive.

Iran’s economy has been hit hard in the past year by sanctions imposed over its disputed nuclear program. The country has largely been cut off from the international banking system and the riyal has lost about half its value against the dollar in the free market.

The sanctions have slashed Iran’s oil exports, which in normal times accounted for nearly four-fifths of its total exports and two-thirds of government revenues. In June, Tehran admitted its oil exports had shrunk between 20 and 30 percent.

In January this year, Iran announced an 8 percent devaluation of the riyal to 12,260 against the dollar and said it would enforce a single exchange rate, aiming to stamp out black market traders. But that proved impossible with the sanctions cutting inflows of hard currency into the country.

In March, authorities said they would allow free market trading to coexist with the official rate, and last month they introduced a three-tiered system; the official rate would be used to import basic goods such as meat and medicine, a rate of 15,000 to buy factory machinery and intermediate goods, and the free market rate to import luxuries and other goods.

Mehr quoted Hamid Safdel, deputy minister in the Industry, Mining and Trade Ministry, as saying the new official rate would be somewhere between 12,260 and the free market rate.

Iran’s decision to depreciate the exchange rate may indicate its foreign exchange reserves are being drained by the sanctions and that in order to conserve them, it realizes it must make hard currency more expensive.

Bahmani was quoted by Mehr as saying Sunday that the government had no problem securing foreign currencies.

At the end of last year Iran had $106 billion of official foreign reserves, enough to cover an ample 13 months of imports of goods and services in normal times, according to the International Monetary Fund.

That suggests Tehran probably faces no balance of payments crisis in the near term. But with oil exports shrinking, an economic slowdown threatening to push oil prices down further and sanctions making it more expensive for Iran to import many goods, Tehran may feel a growing need to protect its reserves.

 
A version of this article appeared in the print edition of The Daily Star on August 07, 2012, on page 5.
Home Middle East
 
     
 
Iran rial / Iran / Economics
Advertisement
Comments  

Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

comments powered by Disqus
Advertisement


Baabda 2014
Advertisement
Follow us on Facebook Follow us on Twitter Follow us on Linked In Follow us on Google+ Subscribe to our Live Feed
Multimedia
Images  
Pictures of the day
A selection of images from around the world- Saturday April 19, 2014
View all view all
Advertisement
Rami G. Khouri
Rami G. Khouri
Why Israeli-Palestinian talks fail
Michael Young
Michael Young
Why confuse gibberish with knowledge?
David Ignatius
David Ignatius
Echoes of 1914 characterize the Ukraine crisis
View all view all
Advertisement
cartoon
 
Click to View Articles
 
 
News
Business
Opinion
Sports
Culture
Technology
Entertainment
Privacy Policy | Anti-Spamming Policy | Disclaimer | Copyright Notice
© 2014 The Daily Star - All Rights Reserved - Designed and Developed By IDS