Iran's rial hits an all-time-low against the US dollar

[Bezant]

"Iran’s currency, the rial, fell as much as 18% on Monday to a record low against the US dollar, according to media reports.

It dropped to as much as 35,000 to the dollar, according to agencies citing currency exchange sites in the country.

The currency has reportedly lost 80% of its value since the end of 2011.

The fall suggests economic sanctions imposed over its disputed nuclear programme are hitting economic activity ever harder.

---

Analysis
Sebastian Usher Middle East analyst, BBC News

*The Iranian rial is in freefall. The collapse was so precipitous that Iranian currency websites blanked out the rate.

International attention may be focused on the country’s alleged ambitions for a nuclear bomb, but for ordinary Iranians it is the economy that is the real issue.

Inflation is raging, making some basic foodstuffs prohibitively expensive. Economic sanctions, led by the US and European Union, have played a key role. Iran has been all but frozen out of the global banking system, with its oil exports slashed.

But government mismanagement has also played its part. A government exchange centre undercutting the black market rate, launched just last week, has only made things worse. Opposition websites are castigating the authorities, with one website accusing the central bank of being incapable of getting the situation under control.
*

(bbc.co.uk/news/business-19786662)*

 

[Luigi_Daniele]

Pretty embarrassing considering how weak the dollar is.

 

[jwakja]

I like the “Government mismanagement has also played it’s part”. What part of this is our future with more mismanagement from more government and higher taxes in our future with the present administration? Looks bad for us with these present “spend to the end” liberal democrats in washington. God help us!

 

[ProdglArchitect]

God help us!

At this point, I think it’d be better for God to let the nation collapse as a reminder to people that there are consequences for turning your back on Him.

That said, as an American I very much hope this nation doesn’t collapse… I like to eat…

 

[Valeite]

I like the “Government mismanagement has also played it’s part”. What part of this is our future with more mismanagement from more government and higher taxes in our future with the present administration? Looks bad for us with these present “spend to the end” liberal democrats in washington. God help us!

‘From each according to his ability, to each according to his need’. Not the dictum of the capitalist society admittedly, but one having a strong moral base.

I think that Obama is closer to this than Romney. But then again, I’m not American - I’m just a Brit who catches cold whenever America sneezes.

 

[He_Man]

Wow, that is rially low.

 

[Dale_M]

The Iranian rial has lost 40% of its value during the past week. Much of the problems have to do with public mistrust of government policies.

Under the new policy, the central bank established a “foreign exchange center” that gives preferential rates to importers of priority goods like meats, grains and medicine. But economists said the central bank may have inadvertently telegraphed fears that it was low on dollars, or at least lacked access to a large part of its estimated $110 billion in foreign exchange reserves. Some of that money is frozen in offshore accounts.

“What we have now is a massive dumping of rials,” Mr. Kupchan said.

[Djavad Salehi-Isfahani, an economics professor at Virginia Tech] said the situation had been exacerbated by Mr. Ahmadinejad’s insistence that rates for borrowers and depositers could not exceed the inflation rate. One consequence was that few Iranians keep their money in banks. Worries that the government was not being upfront about inflation may have been further aggravated, Mr. Salehi-Isfahani said, by its decision a few weeks ago to stop publishing the inflation rate, which is officially 23.5 percent but probably much higher.

nytimes.com/2012/10/02/world/middleeast/irans-rial-plummets-against-the-dollar.html?ref=global-home

Recently, 10,000 Iranian workers signed a petition which was addressed to the Minister of Labor. In it, they complained about the decline in the purchasing power of their wages amidst spiraling inflation. A large part of Iran’s food and medicine comes from abroad, so the decline in the value of the rial especially affects the cost of those things.

 

[Bezant]

The Iranian rial has lost 40% of its value during the past week. Much of the problems have to do with public mistrust of government policies.

nytimes.com/2012/10/02/world/middleeast/irans-rial-plummets-against-the-dollar.html?ref=global-home

Recently, 10,000 Iranian workers signed a petition which was addressed to the Minister of Labor. In it, they complained about the decline in the purchasing power of their wages amidst spiraling inflation. A large part of Iran’s food and medicine comes from abroad, so the decline in the value of the rial especially affects the cost of those things.

Thank-you for the article. In your opinion, can the U.S. exploit Iran’s struggling economic situation to encourage its government to scale back their nuclear development programme?

 

[Bezant]

More reading if anyone is interested:

" Iran rial: Mahmoud Ahmadinejad blames slide on ‘enemies’ "
**
Iranians on the crisis:**

• Amin, a manufacturer who closed his factory on Monday: I turned off my computer half an hour ago as I couldn’t take checking the prices any more. We don’t even know how much we should sell the goods we have. If we want to sell them at the price of the free market, no-one could afford to buy them.

• Vahid, a young man in Tehran: Now I witness our national money has turned to the cheapest currency in the world. How is that possible? Why did it not happen at the time of the Shah? Now I have to pay for my yoghurt, butter and milk in dollars, I can’t spend rials!

• Leila, a student in Tehran: A year ago, I decided to continue my studies at a European University. I was planning to leave Iran in February. But I am faced with a huge leap in currency prices. It totally ruined my plans, it made it totally impossible for me to continue my studies outside.

(bbc.co.uk/news/business-19798655)

 

[Dale_M]

Thank-you for the article. In your opinion, can the U.S. exploit Iran’s struggling economic situation to encourage its government to scale back their nuclear development programme?

I have no special insight in such things.

But clearly that is the hope of the sanctions which have been imposed by the US and by European countries. From the news article you just posted, it seems the sanctions are hurting the entire economy. And the Iranian rial continued its downward plunge both yesterday and today.

I think food prices could be important. The cost and availability of food is felt directly in the home and felt pretty much daily. The issue could put a lot of pressure on the government.

 

[Bezant]

I have no special insight in such things.

But clearly that is the hope of the sanctions which have been imposed by the US and by European countries. From the news article you just posted, it seems the sanctions are hurting the entire economy. And the Iranian rial continued its downward plunge both yesterday and today.

I think food prices could be important. The cost and availability of food is felt directly in the home and felt pretty much daily. The issue could put a lot of pressure on the government.

Suspending judgement is probably the wisest thing. We often never know these things until they happen.

The public dissatisfaction appears to be growing (bbc.co.uk/news/world-middle-east-19812482). I hope the protests will at least start something for Iranians. The government has to be accountable for this at the very least.

 

[smndtupidisaftr]

Have sanctions ever worked? I’m all for diplomacy, but sanctions are an act of war. The US has had sanctions against Cuba, North Korea, Iraq, and look at what always happens. The people starve, anti-US sentiment grows, and the leaders GAIN AN EXCUSE BY BEING ABLE TO BLAME THE SANCTIONS! It doesn’t get leaders to stop what they’re doing: it only solidifies their positions in the government.

 

[Dale_M]

Have sanctions ever worked?

I think that is hard to say, since when change has occurred (e.g. apartheid South Africa) the international sanctions were accompanied by strong domestic pressure for change, often in the form of violent rebellion.

 

[Bezant]

Have sanctions ever worked? I’m all for diplomacy, but sanctions are an act of war. The US has had sanctions against Cuba, North Korea, Iraq, and look at what always happens. The people starve, anti-US sentiment grows, and the leaders GAIN AN EXCUSE BY BEING ABLE TO BLAME THE SANCTIONS! It doesn’t get leaders to stop what they’re doing: it only solidifies their positions in the government.

On their own they don’t, but combined with certain factors, there’s a chance. In the second article I posted Ahmadinejad blamed the currency problems on European hostility; there have been sanctions against Iran for about a decade and Iranians aren’t buying it. Iran is on shakier ground economically and regionally than it was two, three years ago. Which leads me to believe perhaps we are not in a “red zone” as Prime Minister Netanyahu has put forward.