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Monday, December 1, 2014

Iranians Cautioned against ‘Frenzied Behavior’ as Rial Dips - UPDATES

Iran’s Minister of Economy Ali Tayyeb-Nia cautioned against “frenzied behavior” on Monday after the national currency rial traded at its lowest value since Rouhani was elected president in June 2013. Rial’s free market rate against the dollar was at 35,000 on Sunday, although it has recovered in value in intra-day trading on Monday.

“There has been no fundamental change in the foreign exchange and the investment markets, and we expect to create a stable situation in currency and investment markets,” Tayyeb-Nia said (ISNA/Reuters, 1 December)

Official news agency IRNA also quoted Tayyeb-Nia as saying that people should not exhibit “frenzied behavior.”

Externally, the rial is under pressure by plunging oil prices, the worst since the collapse of financial system in 2008, with Brent crude trading at $69 a barrel on Monday. Internally, the market seemed to have lost confidence in Rouhani’s economic reforms and his ability to lift sanctions.

Meantime, consumers in Iran woke up on Monday to bread prices 30 percent higher than yesterday, Fars News Agency reported. Bread is a principle dietary staple in the country, and any sharp rise in its price could create a public backlash against the government.

UPDATE: After the minister's announcement that the government will defend rial, the central bank (CBI) poured large amounts of dollars into the country's Forex free market, purchasing rial to stabilize the currency. the extent of CBI's intervention was not clear, but subsidizing the currency could be very costly.

UPDATE (Wed 3 December): The exchange rate is back to 35,000 rials a dollar, wiping out the gains it made in the past two days.

1 comment:

  1. " After the minister's announcement that the government will defend rial, the central bank (CBI) poured large amounts of dollars into the country's Forex free market, purchasing rial to stabilize the currency. the extent of CBI's intervention was not clear, but subsidizing the currency could be very costly."

    they did it before and it WAS very costly...and not very effective.

    the Iranian economy ..and the Iranian middle- and lower-class of consumers are in for some rough times in the aftermath of the Iranian government's failure to conclude a deal.

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