Iran rial hits fresh record low

Kuwait Times - - BUSINESS -

Iran’s cur­rency plumbed new lows against the dol­lar yes­ter­day, con­tin­u­ing a six-month de­cline that has seen the rial lose some 19 per­cent of its value de­spite the lift­ing of sanc­tions.

The rial was trad­ing at 41,300 to the dol­lar, down from 34,600 in Junewiden­ing the gap with the of­fi­cial govern­ment rate which re­mains fixed at 32,300.

The de­cline has quick­ened since the US elec­tion of Don­ald Trump, who has threat­ened to tear up the nu­clear deal with world pow­ers that re­moved many global sanc­tions in ex­change for curbs to Iran’s atomic pro­gram. Iran’s cen­tral bank ap­pears to have slowed its in­ter­ven­tions with­out ex­pla­na­tion.

“Be­fore, the cen­tral bank was in­ject­ing dol­lars into the mar­ket to main­tain the level of the rial, but it has greatly re­duced its in­jec­tions in re­cent weeks,” said a cur­rency bro­ker in Tehran, who asked not to be named. The tight­en­ing of global sanc­tions in 2012 had a dev­as­tat­ing im­pact on the rial-which fell to 35,000 to the dol­lar from around 10,000 just two years ear­lier.

Ex­perts say much of the cur­rent prob­lem lies with the re­fusal of global banks to re­turn to Iran de­spite the end of sanc­tions-mak­ing it dif­fi­cult to se­cure trade and in­vest­ment deals.

“The big in­ter­na­tional banks still refuse to work with Iran, which is pre­vent­ing the repa­tri­a­tion of petrol money,” said the bro­ker.

The banks are re­luc­tant to en­gage with Iran’s opaque econ­omy, and fear they could fall foul of re­main­ing US sanc­tions that were not af­fected by the nu­clear deal. The worry now is the re­turn of high in­fla­tion as im­porters are forced to pay more for con­sumer goods and in­dus­trial parts. That would re­verse one of the few suc­cesses of Pres­i­dent Has­san Rouhani’s govern­ment, whose ef­forts to re­build trade ties and im­prove eco­nomic man­age­ment has seen in­fla­tion fall from more than 40 per­cent to 8.6 per­cent since he was elected in 2013. —AP

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