Rial at Historic Low

The Iranian currency rial continued loosing value against US dollar and finished the day at 13,070 rials per dollar, a historic low. Since Ahmadinejad has become president, the rial has lost more than 40% of its value against dollar.

Iran Currency Declining

The Iranian currency rial continued losing value against dollar on Tuesday, with the US dollar traded at 12,720 rials in open exchange markets in Tehran. At this rate, the dollar was being traded at 22 percent above the official rate of 10,660 rials set by the Central Bank of Iran (CBI).

Yesterday, CBI asked commercial banks to start selling dollar at the official rate. But Fars News Agency is reporting today that the banks have generally ignored CBI’s directive and were not offering dollar at that rate.

Iran’s Ministry of Economy Criticizes Currency Devaluation

The Central Bank’s Devaluation of Rial is Opposed by the Government

Iran’s semi-official news agency Fars today reported that the Ministry of Economy (MoE) had opposed the devaluation of the country’s currency, rial, by the Central Bank of Iran (CBI). Earlier this month, the CBI devaluated the rial by 11% against the dollar. The officials at MoE have told Fars that they were not consulted prior to CBI’s move and are in strong opposition to the radical devaluation of rial in the midst of government’s subsidy reforms program. They told Fars that they were “shocked” by CBI’s unilateral action. This is the first time in recent memory that the officials of MoE have openly criticized CBI’s monetary policies.

CBI defends its action as an effective tool to slow down the rapidly growing volume of foreign imports into the country and as an attempt to bring the country’s official exchange rate close to the market rates, hence preventing the reemergence of a system of multi-layer FX rates, with deficiencies and corruption that such system would create.

The government is seriously concerned of the rising tide of the inflation in the country during the period that the government subsidies are being phased out. The official devaluation of rial would force the importers of raw materials to pass along the added costs to their consumers, pushing the prices higher across the board.

Iran Currency Sliding

The Iranian currency rial continued its slide against dollar today, hitting a record low of 12,220 rials per dollar. Last Wednesday, the Central Bank of Iran (CBI) officially devaluated the currency by 11% to 11,710 rials per dollar. But the move did not stop rial’s fall in free markets, and just during the last three days the currency has lost another 4% in value.

On Saturday, the Federation of Industries, a trade group representing the Iranian industry, issued strong warnings against currency devaluation. In an open letter to President Ahmadinejad, the group said the 11% fall in rial’s value is causing the prices for raw material which are heavily imported to rise at least at the same rate, causing a corresponding rise in the prices of finished consumer goods.