Rial Losing Value

The Iranian currency rial today reached its lowest value against dollar since Rouhani came to power in August. Fars News Agency reports that each dollar was trading for 31,250 rials at currency exchange markets today.

In July of last year, Ahmadinejad’s government devaluated the rial by 100%, setting the official rate of exchange at 24,770 rials per dollar, as opposed to 12,260 that was in effect since 2012. Since Rouhani came to office in August, the rial has been trading in exchange markets below 30,000, but now it has passed that psychological mark.

The Iranian economy suffers from a very high inflation, officially at 38% annual rate, and negative economic growth.

Photo credit: IRNA

Majil to Probe Central Bank of Iran over National Currency Crisis

The Iranian parliament, Majlis, today voted 171 to 36 to investigate the country's central bank over its response to last year's currency crisis. The value of rial against the U.S. dollar plummeted in the last year as sanctions against the Central Bank of Iran and limitations on Iran oil exports started going into effect. The rial ended up losing more than half it value against dollar in 2012.

Parliamentarians have accused the central bank of mishandling the currency's decline, including accusations that it did not provide the market with enough dollars to meet demand.

“There are many questions that need to be asked in order to uncover the truth, because the responsibility of organizing the currency market is with the central bank,” said Mohammad Alipour, spokesman for parliament's economic committee. “One of the questions is what preventive measures this bank took to organize the market and prevent (dollar) price jumps.” (ICANA/Reuters, 20 January)

The investigation will also look into how the central bank manages Iran's money market, sets interest and loan facility rates, and allocates currency for imported goods, Alipour told Iran’s parliamentary news agency ICANA.

Photo: Iranian national currency, the rial (ISNA)

The Iranian government eliminate exchange subsidy for airlines

Photo credit: airliner.nl, unkown

last updated at 11:52 EDT, Tuesday, 18 September 2012

قطع ارز دولتی شرکتهای هواپیمایی ایران

According to ISNA, The Iranian government is going to eliminate the discounted exchange rate, of 12,260 rial for the dollar, currently offered to the Iranian airlines this week. Abdul Reza Musavi, the head of the head of the Iranian airlines association, told ISNA that the airline industry is in "shock", and predicted that the airline industry is at risk of collapse without the government exchange subsidy.

Interestingly the ISNA website published this news only on its Persian version, and the English version was censored (was not able to find it despite my best effort).

In light of the recent injection of dollars into the exchange market by the Iranian central bank in response to political pressure, this new event demonstrates the possibility that the central bank is running out of forign currency to sustain even the most important subsidies, like that of the airlines.

Inflation at 26.5%

Dollar Reaches 20,000 Rials (Again)

The government’s Statistics Center of Iran (SCI) in a report to the country’s Supreme Council for Labor published this week has put the current rate of inflation in the country at 26.5 percent. Using a basket of 359 goods, the SCI has measured price increases for the 12 months period ending in the last day of Bahman 1390 (22 February 2012). The Majlis Research Center, the parliament’s statistics center, has also estimated an inflation rate of over 30 percent for the current Iranian calendar year that ends on Tuesday 20 March.

Meanwhile, the rial-dollar exchange rate has hit 20,000 rials per dollar in open exchange markets this week. The development is a major setback for the government’s efforts to maintain a unitary exchange rate of 12,260 rials per dollar. The official rate was set in January, coupled with strong interventions by the country’s central bank, when dollar had passed the 20,000 mark in open markets.

Toman Hits Historic Low Against Dollar

Dollar Traded on a Tehran Street

Tehran. 6 June 2010. Mehr Photo

Iranian toman has hit an all-time low of 1,055 tomans per dollar in Tehran’s FX market. Since the beginning of the current Iranian calendar year (20 March 2010), the toman has started a sharp decline against dollar, starting with 950 tomans per dollar, and now hitting the historical low of 1,055. [Each toman is 10 rials, which remains the nominal official currency of Iran].

Oil and Dollar

As the oil prices are closing in on $100, Iran has been pressing OPEC to study the weak dollar's effect on the oil cartel's earnings and to study the feasibility of pricing oil in a currency basket instead. Iran which uses most of its dollar-based oil revenues on euro and yen-based imports has been particularly hit hard by the free fall in dollar value.

President Ahmadinejad, attending the OPEC summit, today said a majority of OPEC heads of state have expressed willingness to study the switch away from dollar. The final communiqué issued today at the end of the summit said OPEC will study “proposals by some of the heads of state and governments,” apparently referring to Ahmadinejad’s (and Hugo Chavez’s) proposal on the switch away from dollar.

The controversy over dollar-based oil pricing come few months before Iran celebrates the 100th anniversary of its discovery of oil with $100 oil! The first oil wells of Iran and the Middle East were discovered and drilled in Masjid Soleyman, in southwestern Iran, in 1908. In the past 100 years, Masjid Soleyman alone has produced more than 1.5 billion barrels of oil.

Iran’s crude oil export revenues are expected to surpass $70 billion this year. Iran feels, however, that the weak dollar has eaten considerably into its oil revenue bonanza of the recent years.