Iran currency hits new record low

Iran currency hits new record low
The Iranian rial reached yet another new low against the dollar on April 2. / Photo by hosein charbaghi on Unsplash
By bne Tehran bureau April 2, 2024

Tehran's currency market kicked off the new Iranian year with a significant surge in exchange rates, according to reports from local media on April 2.

The US dollar price reached a historic high on Tehran’s Bureaux de Change epicentre on Ferdowsi Street, breaching the psychological threshold of IRR 630,500, marking a notable 2.1% increase compared to the previous day's close.

However, stability was briefly experienced in early March when the Central Bank of Iran (CBI) intervened by injecting Emirati dirham into the market to meet the escalating demand for foreign currencies. The dirham, seen as a significant player in Tehran, also saw its value soar to unprecedented levels, surpassing IRR 173,500, representing a 1.5% increase compared to the previous day's close.

At the start of the short trading week, people returned to Ferdowsi Street hoping to buy dollars and other foreign currency to offset a potential spike in the dollar following a bank holiday called Nature Day, marking the end of the holiday period amid the backdrop of worsening tensions across the region following the killing of Iranian military in Syria on April 1.

The uptick in the dollar was seen earlier in the holidays as the black market website indicated a push by buyers to collect stocks of dollars before the start of trade in the country after 14 days of holiday. This upward trajectory for the American currency has been evident since the beginning of 2024, with successive record highs. Since January 1, 2024, the USD has grown nearly 20%. 

Reza, a 39-year-old trader at one of the bureau de change, said the return of buyers was a contributing factor to the weakened rial: “I expect a run on the rial in the next few days, as people may be whipped up into a buying frenzy fearing bigger drops like before the holidays.”

The trader, who was selling dollars on the black market, spoke to bne IntelliNews on condition of anonymity because of the sensitivity of the issue currently.

Sara, a 29-year-old living in Europe visiting the country for the holidays, said the increase in prices was typical: “This happens every year as shops increase their prices, so people attempt to offset that; I’ve left €2000 with my mother just in case she needs it with everything going on.”

The two-week Iranian New Year Holidays, called Nowruz, has historically been a time of outbound travel, but this year, due to the weakened rial, many have opted for staycations in the north and south of the country.

Morteza, a 31-year-old ride-hailing driver from the local Uber-like app Snapp! from south Tehran, said: “I am genuinely shocked at what is happening; I am already working 16-hour shifts to try and make money, and the prices are going to explode for items if this continues.”

The black market exchange rate continues to affect the prices of rent, cars and goods bought in corner stores as much of the imports to the country are brought in through grey channels and do not access the official, much lower exchange rate.

Over the past decade, the dollar has increased from IRR30,600 to IRR626,500, or more than 1947%, whereas from February alone, the USD has jumped more than 14% with no sign of returning to a lower rate.

Inflation in the country at the end of the previous Persian year (ended March 20), according to the Statistical Centre of Iran (SCI) was recorded at 40.7% during the 12 months of the previous year, dropping from over 45% earlier in the year.

President Raisi, who was ushered into power under a “not free or fair” election due to the gerrymandering of candidates, has failed to stop the decline of the rial. Yet, despite this, his hardline faction currently in charge of the country has quietly refused to restart negotiations on the nuclear file, which enabled foreign investors to enter the country.

Despite the lack of direct negotiations, there have been potential signals that the embattled Raisi administration would contemplate backroom discussions over the nuclear programme. However, with the ongoing war in Gaza, Israel will likely attempt to stop any move by Iran to escape its gordian knot.

At the turn of the Nowruz, Iranian ‘supreme’ leader and spiritual guide of the Islamic Republic, Ali Khamenei, called the new year’s goal to increase the “pace of production,” however this fell flat among many in the country as it continues to battle the ongoing economic challenges.

"If we want to leap in production...we must pave the way for people to participate in it truly. That is why I have declared this year the 'Year of Explosive Growth in Production through People's Involvement’," Khamenei said in a statement published on his official website.