Rial Falling

The Iranian currency rial fell to its lowest value against dollar in two years, trading at 35,000 rials per dollar on Monday, Fars News Agency reported.

Oil Prices Continue Falling

Russia Raises Interest Rate to 17% to Shore Up Ruble – Rial Tumbles to 35,000 against the Dollar

 

Oil prices continued falling today, with Brent crude closing at $60.51 a barrel. A Bloomberg survey of 17 oil analysts on Sunday showed they expect the prices slide to as low as $50 a barrel in 2015. The UAE oil minister said today in Abu Dhabi that OPEC would not intervene by limiting output even if the price hits $40 a barrel.

In Russia, the plummeting oil prices caused the ruble tumble past 64 against the dollar for the first time. In January, the rate was 33 rubles per dollar; meaning the national currency has lost half its value this year. Russia has spent $80 billion of its foreign-exchange reserves in an unsuccessful attempt to prop up the ruble.

The Russian Central Bank, after an unusual early morning emergency economic meeting in Moscow, announced at 1 a.m. local time on Tuesday that it would raise its key interest rate to 17 percent from 10.5 percent, effective Tuesday, to shore up the ruble. The 17-percent interest rate, although it could strengthen the ruble in the short term, could significantly slow the country’s economy, which is already under sanctions for Crimea annexation.

The economies of Venezuela, Nigeria, Iraq and Iran are also under severe pressure from the falling oil prices. Venezuela might not be able to pay loan payment of more than $21 billion in 2015, which will force the country into default. Nigeria has devalued its currency to lowest levels seen. And Iranian currency rial today traded at 35,000 against the dollar, a loss of 20 percent in value since January. Iraq, in the midst of a growing war, can also ill afford the $60 oil.

Rial Falling

Iranian national currency rial has fallen sharply in value in recent weeks and on Sunday closed at $34,800 rials a dollar.

The rial has lost more than 16 percent of its value this year. The failure of Vienna talks and especially the plummeting oil prices in recent weeks have put significant pressure on the currency. The Rouhani administration is reluctant to defend the rial and burn its limited foreign exchange reserves in the process. But the falling rial could push the inflation rate significantly higher, wiping out recent government successes to slow down the rate.

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.

Rial Continues Its Fall - UPDATE

Iranian currency rial continued its downward spiral, trading at 35,000 rials (3,500 tomans) per dollar on Sunday. Rial fell to record low in Januray 2013 at 40,000 rials/dollar. But after the election of Hassan Rouhani as the country's new president in June 2013, the rial value climbed to 28,000 rials/dollar. Now it seems we are back to pre-Rouhani days.

It seems market’s lack of confidence in Rouhani’s economic reforms, his inability to lift the sanctions, plus plunging oil prices are exerting downward pressures on rial, with no immediate end in sight. The government, suffering from nearly 40-percent decline in oil revenues, might not be able to defend rial as much as it likes; hard-currency revenues are so much lower than expected and budgeted for.

UPDATE: On Monday, rial gained back losses and traded at 34,000 a dollar, this after the minister of economy pledged to support the national currency. It is believed that the central bank poured large amounts of dollars into the country's currency-exchange free market, purchasing rials to stabilize it. It was not clear how much the move has cost the government, but subsidizing currency could be quite costly. 

Rial Falling

Government Delays Subsidy Reforms

Today, the Iranian national currency traded at 34,000 rials per dollar. This is a new low during Rouhani administration. In June 2013, Rouhani’s surprise victory stopped the downward spiral of the rial. Since the beginning of 2014, however, rial has slowly lost ground and in the past week the trend has accelerated. Today’s rate is a loss of nearly 14 percent in the value of rial since Rouhani’s election. The failure of Vienna talks to produce a final nuclear agreement and the plunging oil prices are believed to be the main causes for the falling value of the rial.

Oil Prices have also continued their downward trend, with Brent crude trading at $70 a barrel. Between the loss in export levels after oil sanctions went into effect in 2012, and the recent drop in oil prices, Iran’s oil export revenues, its main foreign currency source, are a third of what they were only two years ago.

Meantime, Rouhani administration on Saturday decided to delay planned subsidy reforms. The government probably regards the subsidy cuts as politically inconvenient, expecting backlash. The decision to delay, however, will put added pressure on the value of rial and could reverse recent gains in the fight against inflation. These are indeed challenging times for the Iranian economy.

Iran: 14,000 Industrial Units Closed in Recent Years

Industry Minister Delivers ‘Shocking’ Report

Iran’s Minister of Mines and Industries Mohammad Reza Nematzadeh reported to the cabinet today that 14,000 industrial units have been shut down in the country in recent years due to severe financial problems. Nematzadeh, calling the numbers “shocking,” said an allocation of 40,000 billion rials (around #1.3 billion) was needed to help some of the factories resume their activities. (Iran Daily/IRNA, 12 July)

It was not immediately clear if the government will be asking the parliament for the extra funding during a time that the government’s budget has been cut significantly across the board. Sanctions and a decrease in the value of the national currency are seen as the main reasons for the closure of industrial and production plants in recent years.

File photo: A textile research facility in Gilan province, Iran. (FNA)

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

Rial Rises in Open Market

The Iranian currency, rial, strengthened on the open market today, trading at 33,400 rials a dollar. The new rate represents an 8.5% appreciation in relation to dollar since Rouhani’s victory in 14 June presidential election.

On Saturday, the Central Bank of Iran (CBI) devaluated the official rial rate by more than half, from 12,260 to 24,777 rials a dollar. The official rate is now closer to open market rate. The official rate is in fact a subsidized rate available only to selected importers of basic commodities and medicine. The great majority of importers and ordinary citizens are not eligible for the subsidized rate and need to purchase their dollars in open market.

Rial Loses Value as New Sanctions on Gold Trading Go into Effect

New U.S. sanctions against Iran, including a ban on gold trading, came in force today. Reacting to the new sanctions, the rial retreated against the dollar in Iran’s open currency markets. On Monday, the currency was traded at 34,000 rials for one dollar. In the days after Rouhani’s victory, the rial had regained some of its lost value, trading as low as 28,000 rials a dollar.

Because of earlier sanctions on banking sector and financial transactions, Iran is increasingly trading its oil for gold with countries like Turkey, and the new ban on gold trading is meant to stop Iran from circumventing those sanctions. 

Iran's Currency Is Surging Against The Dollar

The Iranian currency rial is surging against the dollar since the victory of Hassan Rouhani in last week’s presidential election. On Sunday, the rial was traded at the country’s open markets at 28,000 to a dollar. This is a 30% rise in value against dollar since January 2013 when the currency rate hit 40,000 rials a dollar. Strengthening the value of rial was high on the list of Rouhani’s campaign priorities. 

Rial Rising!

The Iranian currency, rial, has risen 17 percent in value against dollar since the victory of Hassan Rouhani in last week’s presidential election. Rial hit 31,500 per dollar on Saturday. It was traded at nearly 38,000 to a dollar just before the election.  

New U.S. Sanctions Against Rial

The United States has introduced sanctions against the Iranian currency rial, the White House has announced.

The sanctions target any “foreign financial institutions that knowingly conduct or facilitate significant transactions for the purchase or sale of the Iranian rial, or that maintain significant accounts outside Iran denominated in the Iranian rial,” reads a statement issued on Monday by the White House Press Secretary.

“While the rial has lost half of its value since the beginning of 2012 as a result of our comprehensive sanctions, this is the first time that trade in the rial has been targeted directly for sanctions,” the statement added.

The sanctions will go into effect on July 1.

New sanctions have also been imposed on “the sale, supply, or transfer to Iran of significant goods or services used in connection with the manufacturing or assembling in Iran of light and heavy vehicles including passenger cars, trucks, buses, minibuses, pick-up trucks, and motorcycles.”