Iran's currency plunges to a record low as US sanctions near

Iranian President Hassan Rouhani attends a meeting with Muslim leaders and scholars in Hyderabad, India, February 15, 2018. REUTERS/Danish Siddiqui


Iran’s currency, the rial, sank to an all-time low over the weekend, falling below 100,000 rials to the dollar, ahead of the first round of US sanctions which are set to go into effect next week.

The rial fell past 112,000 against the dollar on the black market Sunday, according to the Bonbast.com. Its value has more than halved since April. 

Iran’s central bank blamed rising gold prices and faulted “enemies” for the sharp selloff. 

“The recent developments in the foreign exchange and gold markets are largely due to a conspiracy by enemies with the aim of exacerbating economic problems and causing public anxiety,” the central bank said in a statement read on state television, according to Reuters

Meanwhile, looming sanctions are weighing on the rial. As part of President Donald Trump’s decision in May to withdraw from the Iran deal, the US has vowed to reimpose tough economic penalties against Iran. The first round of sanctions, set to take effect August 6, include a ban on “significant” purchases of Iranian rials.

The US Treasury Department said it will also sanction US dollars, precious metals, and industrial goods next week, as well as halt Iran’s ability to export carpets and foods into the US and end certain license-related transactions.

Analysts see the first round of US sanctions as a pivotal moment for Iran and its economy, which has already been ailing amid political unrest, embargoes, and corruption scandals. 

“Moreover, the window of opportunity for Europe to demonstrate that the nuclear deal is worth salvaging will likely close once the sanctions snap back,” RBC analysts led by Helima Croft wrote in a recent note. 

Another round of US sanctions is set to take effect in November, perhaps most notably crippling Iran’s energy sector. The State Department last month called on all countries to stop importing Iranian oil by November or risk facing secondary sanctions. 

The chart below shows the rial’s official exchange rate:

Screen Shot 2018 07 30 at 10.43.39 AM

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