Iran currency hits record low, crashing through 50,000 mark

TEHRAN: The Iranian rial fell to a record low on Monday, breaking through the 50,000-tothe-dollar mark for the first time, as analysts blamed uncertainty from Washington.

The rial has lost around a quarter of its value in the past six months, falling to 50,860 against the US dollar, according to Financial Informing Network, a trusted Iranian website for open market currency rates.

The gap between that and the official rate, which stood at 37,686 on Monday, has continued to widen.

Iran’s government took drastic measures last month to stem the decline in the free market rate, arresting foreign exchange dealers, freezing speculators’ accounts and raising interest rates.

But on the streets of Tehran, long queues continued to gather outside foreign exchanges in the run-up to this month’s Nowruz Persian New Year holiday.

“The issue is psychological rather than economic. There’s no reason to buy dollars except in the hope that you can sell them later at a higher rate,” said Esfandyar Batmanghelidj, founder of the Europe-Iran Forum, a business network.

He said Iranians were reacting to worrying news from the United States, where President Donald Trump this month appointed hardline anti-Iran figures Mike Pompeo and John Bolton to senior posts in his administration.

Many analysts believe Trump will pull out of the 2015 nuclear deal with Iran when it next comes up for renewal in May, bringing back crippling sanctions.

“I see many people looking to invest in neighbouring countries because this fear is spreading about the future of the JCPOA (nuclear deal),” said Navid Kalhor, a Tehran-based financial analyst.

Local officials have complained that Iranians are hoarding billions of dollars as local banks run short of cash.

“I have friends who go to banks and ask for 15 or 20 million tomans (150 million or 200 million rials, US$3,000 or US$4,000) and they’re told to come back in a week because they’re out of cash,” said Kalhor.

The devaluation poses a major problem for President Hassan Rouhani’s government, which had hoped to attract massive foreign investment in the wake of the nuclear deal.

Already facing huge obstacles from remaining, non-nuclear US sanctions, the collapsing currency will serve as another deterrent to potential investors, Batmanghelidj said.