Iran's rial hits new low after minister acknowledges slide

A man buys Iranian rials from a seller of Iranian currency, before the start of the U.S. sanctions on Tehran, in Basra, Iraq November 3, 2018
A man buys Iranian rials from a seller of Iranian currency, before the start of the U.S. sanctions on Tehran, in Basra, Iraq November 3, 2018

The Iranian currency hit yet another all-time low of 780,250 rials to the US dollar on Monday after the country’s economy minister acknowledged the significant devaluation of the currency.

In a statement during a session of the Iranian parliament's economic commission, Abdolnasser Hemmati said that under normal political and economic circumstances the rial should be trading somewhere close to 73,000 per dollar—a figure significantly higher than Iran’s official exchange rate.

"Of course, this calculation assumes normal economic conditions and stable political and security situations," Hemmati said.

Upheaval in Syria and tensions with Israel along with threats to the economy as US President-elect Donald Trump prepares to take office were among the causes, Hemmati said.

“Given 30% inflation, it is impossible to maintain a stable exchange rate,” Hemmati said.

While Iran has multiple exchange rates, including the open market rate and the official rate, the open market rate most accurately reflects the true value of transactions.

Hemmati further noted that while the government’s official exchange rate is 400,000 rials to the dollar, many goods are traded in the market within the 700,000 to 800,000 rials range.

The reaction to Hemmati’s remarks in Tehran’s currency market was swift and severe. Within hours, the dollar climbed by over 20,000 rials. According to data from Tehran exchange offices, the dollar traded at 780,250 rials, while the exchange rate for dollar remittances rose to 790,800 rials.

The minister later retracted his remarks and said his comments were misinterpreted and that a video of the session had been edited. However, his commentary was widely covered in local media, and currency traders interpreted his comments as a potential sign of further devaluation of the rial.

Hemmati is scheduled to appear before parliament on Tuesday, alongside other officials including the Central Bank’s governor, Iranian media reported. Lawmakers are set to discuss measures to address exchange rate fluctuations and improve economic stability.

The rial has depreciated by over 25% since September, driven by regional conflicts and Iran’s setbacks in Syria and Lebanon.

Since the establishment of the Islamic government in 1979, the Iranian currency has undergone an 11,000-fold decline in value.