Iran’s rial currency hit a historic low against the U.S. dollar on Saturday, surpassing 1 million rials for one dollar as businesses resumed after a prolonged holiday. Tensions between Tehran and Washington are expected to drive the rial even lower in value.
During the Persian New Year holiday, Nowruz, the exchange rate plummeted to over 1 million rials, as official currency exchanges were closed, leading to only informal street trading. Following the holiday, as trading activities resumed on Saturday, the rate dropped even further to 1,043,000 rials per dollar, indicating a sustained decline in the currency’s value.
In Tehran, on Ferdowsi Street, a major hub for currency exchange in Iran, some traders turned off their electronic signs displaying exchange rates due to uncertainty about how much more the rial might depreciate.
“We turn it off since we are not sure about the successive changes of the rate,” said Reza Sharifi, who works at one exchange.
Tensions with US squeeze the rial
Iran’s economy has been severely affected by international sanctions, particularly after U.S. President Donald Trump unilaterally withdrew America from Tehran’s nuclear deal with world powers in 2018. At the time of the 2015 deal, which saw Iran drastically limit its enrichment and stockpiling of uranium in exchange for lifting of international sanctions, the rial traded at 32,000 to the dollar.
After Trump returned to the White House for his second term in January, he restarted his so-called “maximum pressure” campaign targeting Tehran with sanctions. He again went after firms trading Iranian crude oil, including those selling at a discount in China.
Trump meanwhile has written to Iran’s Supreme Leader Ayatollah Ali Khamenei, trying to jumpstart direct talks between Tehran and Washington. So far, Iran has maintained it is willing for indirect talks, but such discussions under the Biden administration failed to make headway.
Meanwhile, Trump is continuing an intense airstrike campaign targeting the Iranian-backed Houthi rebels in Yemen, the last force in Tehran’s self-described “Axis of Resistance” able to attack Israel after other militant groups were mauled by Israel during its war on Hamas in the Gaza Strip.
Mehdi Darabi, a market analyst, said he believed that foreign pressures in recent months caused “expectations for the possibility of a decrease in oil sales and more inflation, and it caused a higher rate for hard currencies,” according to Tehran’s Donay-e-Eqtesad economic newspaper.
Economic pressure inflames Iranian public and politics
Economic upheavals have evaporated the public’s savings, pushing average Iranians into holding onto hard currencies, gold, cars and other tangible wealth. Others pursue cryptocurrencies or fall into get-rich-quick schemes.
Meanwhile, internal political pressure remains inflamed still over the mandatory hijab, or headscarf, with women still ignoring the law on the streets of Tehran. Rumors also persist over the government potentially increasing the cost of subsidized gasoline in the country, which has sparked nationwide protests in the past.
The falling rial has put more pressure as well on Iranian reformist President Masoud Pezeshkian. In March, when the rate was 930,000 rials to the dollar, Iran’s parliament impeached his finance minister, Abdolnasser Hemmati over the crashing rial and accusations of mismanagement.
Anger over government spending also saw Pezeshkian fire his vice president in charge of parliamentary affairs, Shahram Dabiri, for taking a luxury cruise to Antarctica, state media reported. Though Dabiri reportedly used his own money for the trip with his wife, the Instagram photos posted of his trip angered an Iranian public scrapping by to survive.
“In a situation where the economic pressures on people are huge and the number of deprived people is massive, expensive recreational trip by officials even by their own personal fund is not defendable and reasonable,” Pezeshkian said in firing Dabiri, who so far hasn’t offered any public explanation for his trip.
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Gambrell reported from Dubai, United Arab Emirates.
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