Iran’s rial languishes with no sign of credible nuclear deal rescue from Europe

 Iran’s rial languishes with no sign of credible nuclear deal rescue from Europe
As the nuclear deal unravels, Iranians are losing faith that the end of the severe devaluation of their currency is anywhere in sight. / CC: Griselda Ramirez
By bne IntelliNews June 12, 2018

The collapsed Iranian rial (IRR) dropped to IRR71,000 to the dollar towards the end of black market trading on June 12, following a weakening of more than 5% over the past week.

Confidence in the currency is unlikely to start flowing back while the major European powers fail to announce any credible measures that might offer more than questionable life rafts for Iran’s economy following early May’s unilateral US withdrawal from the nuclear deal and the announcement from Washington that it will be imposing the “strongest sanctions in history” on Tehran. It is not just US investors that are withdrawing from business relationships with the Iranians. Each day brings more news of European bank and companies winding down operations related to Iran, while there has also been a spate of expected Indian oil industry withdrawals appearing on the horizon.

Banned but reliable forex website Bonbast.com, meanwhile, on June 11 was listing the euro and the pound sterling at 81,200 and 92,220, respectively, against the IRR. Those rates are not as punishing towards the rial as they were after Iran’s Nowruz Persian New Year break concluded in mid-March, but they are nevertheless another shock to the Iranian economy.

Local sovereign gold coins the Imami and Bahar Azadi, meanwhile, rose to IRR24.8mn and IRR23.3mn, up more than 4% over the past week.

As the date of Donald Trump’s attempt at destroying the nuclear accord—in order to try and force the Iranians back to the table to negotiate a tougher deal targeting its regional political and military influence and ballistic missile development programme—neared, the Central Bank of Iran (CBI) moved against panicky hard currency buying by banning the unofficial free foreign exchange market. Officially, all foreign currency trading must now be conducted with licensed banks and only at the CBI’s official rate. However, even ordinary citizens have found alternative ways to source hard currencies.

Street hawkers, meanwhile, have returned to Tehran’s forex trading hub, Ferdowsi Square, and exchange bureaux have mothballed their store fronts while continuing to trade in back offices and other unpublicised locations, effectively forcing the market away from the government’s eye entirely.

In recent weeks, the CBI has partially relented on its artificially low exchange rate. The official IRR rate to the dollar presently stands at 42,230. For the euro and pound sterling, 49,797 and 56,629, respectively, must officially be paid.

 

    

 

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