Iran's rial currency dives to historic low
Sat Sep 29, 2012 11:28am EDT
By Yeganeh Torbati
DUBAI (Reuters) - The Iranian rial slumped on Saturday to a historic low against the U.S. dollar, according to Iranian media and currency tracking websites.
The rial fell by 5 percent and was trading at about 28,400 per dollar, compared with about 26,920 on Thursday and about 26,400 on Wednesday, according to Persian-language currency tracking website Mazanex.
There was no clear reason for the latest slide in the value of the rial, which is traded in an informal market of money changers, where ordinary Iranians go to access hard currencies.
Previous falls have coincided with new sanctions or diplomatic isolation of Iran over its contested nuclear program, suspected by the U.S. and its allies of being aimed at obtaining a nuclear weapon. Iran denies this, but has faced successive rounds of stricter sanctions in the last two years.
Iranians rush to money changers to convert their savings into dollars, depressing the value of the rial.
The rial has seen a steep loss in value against the dollar in the last year. In June 2011, it was trading at about 12,000 to the dollar, or more than twice its value now, according to Mesghal.
Earlier this week the Iranian government established a new three-tiered currency system meant to restore stability to the rial.
The system, along with a new "exchange center," allows importers of priority goods like meat and grains to buy dollars at the official "reference" rate of 12,260 rials to the dollar.
Importers of other basic goods are allowed to buy dollars at a "non-reference" rate 2 percent less than the open market value of the rial on any given day. On Thursday, that rate was 23,927 rials to the dollar, Iran's central bank said.
But the exchange center does not appear to have allayed market concerns about the central bank's ability to defend the value of the rial.
Iran's central bank governor Mahmoud Bahmani said on Saturday the open market was "resisting" the exchange center.
"The market is somewhat resisting, but certainly this resistance will be broken soon, because we have entered this center with a strong currency backing," Bahmani said, according to the Fars news agency.
The volatility in the rial has turned into a political flashpoint in recent weeks, with foes of President Mahmoud Ahmadinejad in the parliament accusing his government of mismanaging the situation.
Ezzatollah Yousefian, an Iranian legislator, said international sanctions levied against Iran were not a major cause of the country's economic conditions, Mehr reported on Saturday.
"The first approach today is that authorities accept their mistakes and failures, second, that they not blame their mistakes on others, and third, that they invite all the pundits and experts to find a way to solve the problems of the economy," Yousefian was quoted as saying.
The central bank said in a statement on its website that $34 million had been traded in the exchange center in its first week.
The central bank's deputy for foreign exchange affairs, Minoo Kiani-Rad, said the exchange center would in time help stabilize the rial, according to a statement on the central bank's website on Saturday.
"We must allow some time for the activity of this foreign exchange center to continue so that real demands can be answered and the pressures on the open market can be diminished," Kiani-Rad said. "In this case, there is no reason for a rise in the exchange rate." (Editing by James Jukwey)