Iranian Rial Hits New Low Against Dollar

By Amir Havasi

The Iranian rial plunged to a new low against the US dollar on Monday in what economists said was a slump partly induced by the Middle East's deadliest coronavirus outbreak.

At Tehran's foreign exchange hub on Ferdowsi Street, the currency was being traded at around 192,800 to the dollar at midday, according to AFP journalists.

The rial has hit rock bottom in the past month, collapsing even below the 190,000 rate it fell to in the wake of the US decision in 2018 to withdraw from the Iran nuclear deal and reimpose sanctions.

Reza looked dispirited as he went from exchange to exchange hunting down better rates for dollars needed to pay for a family member's overseas university fees.

The value of the rial against the dollar is "beyond awful now", said the 35-year-old, who has a job in Tehran's Grand Bazaar.

"We're seeing a different rate every day," he told AFP.

The street was busier around government-owned exchanges, as people formed long queues to take advantage of a central bank scheme offering discount rates.

One of those standing in line was a 30-year-old physiotherapist planning to emigrate to Australia.

"The more I work, the less dollars I can buy," she said, only giving her name as Niki.

"This has affected my welfare, made me more stressed. It's a bad situation," she said as she eyed a digital board displaying the latest rates in red.

Iran's already fragile and sanction-hit economy started deteriorating after it reported its first coronavirus cases on February 19, and it has since struggled to contain the outbreak.

US sanctions reimposed in 2018 mainly targeted Iran's oil sales lifeline, prompting the Islamic republic to focus on its manufacturing sector with exports mostly aimed at its neighbors.

Iran earned just $8.9 billion from the sale of oil and related products in the year to March, down from a peak of $119 billion less than a decade ago, according to Mohammad Bagher Nobakht, the head of planning and budget organization.

Coupled with the lower revenues, the coronavirus pandemic led to a temporary shutdown of the economy, border closures and a halt in non-oil shipments.

"The main cause of the current crisis is the coronavirus," said economist Saeed Laylaz, who has acted as an adviser to Iranian presidents.

"Our non-oil exports have virtually stopped, particularly to neighboring countries" due to the COVID-19 outbreak, he noted in a phone interview.

Iran's health ministry on Monday announced 119 new coronavirus deaths and another 2,573 cases of infection.

That takes the overall toll to over 9,742 dead out of more than 207,500 cases in the outbreak, with official figures showing an upward trajectory in new cases of infection since early May.

Iran's government closed non-essential businesses in March in a bid to stem the spread of the virus, but it refrained from imposing a mandatory lockdown on the population.

Restrictions have been eased gradually since April with officials arguing the economy cannot remain shut down.

But the rial's sharp decline was "not unpredictable", said Laylaz, given the considerable growth of liquidity which leads to rising inflation.

The economist said the forex market turmoil had led to "increasing social and political pressure on the government".

According to Yaser Shariat, a market analyst heading a stock brokerage, the rial's troubles may "continue until the epidemic is brought under control" and borders are reopened.

Most of Iran's border crossings with its neighbors remain closed, save for few at Iraq's Kurdistan region, according to Iranian authorities.

Photo: IRNA

Iranians Line Up at Dawn for a Sanctions Meal They Can Afford

Just after dawn Fatemeh Ansari Mokhtari stood alone outside Tehran’s Shahid Baharloo supermarket, gripping the edge of her black chador.

Hours later she was still there, now at the head of a long queue, as a refrigerated van pulled up and the driver unloaded Australian-reared lamb wrapped in white muslin. The 69-year-old was eligible for 3 kilograms of state-subsidized meat, her monthly allotment. “It’s good we have this at least, otherwise what would we do?” she said. “It’s bread and milk, too—the pressure is immense.”

The sidewalk where Mokhtari spent most of that Saturday morning is a front line in what’s increasingly resembling a war economy, with red meat rationed while profiteers and smugglers thrive. Iran isn’t facing a Venezuela-style collapse, but renewed U.S. sanctions have slashed oil revenue, battered the rial and pushed prices beyond the reach of many. Shortages, in meat, medicine, even gasoline in some regions, are spreading; proof, say hardline conservatives, that President Hassan Rouhani’s engagement with the West has failed.

“Each day there’s about a hundred people waiting, but we usually only have enough for about 50 or 60,” said butcher Amir Hossein Siapoush, waiting to cut up the lamb. “It’s like this every day.” The cost of red meat and poultry has surged more than 90 percent from a year ago. US sanctions don’t apply to humanitarian supplies like food but their re-imposition last year froze banking channels and alarmed foreign companies doing even permitted business in Iran. The rial went into free fall and has only partially recovered. Imports, when Iran can afford them, are vastly more expensive. Ministers are prioritizing food and medicines, and last week parliament approved USD 14 billion of Iran’s dwindling resources to support domestic producers and fund “electronic coupons” for the poor that can be exchanged for essential goods. Importers already had access to cheaper foreign currency to ensure a flow of goods, but that policy is blamed for fanning price rises, with companies not passing savings onto customers despite threats of prosecution. 

The government banned livestock exports last August to avoid shortages at home as sanctions came into force, but farmers instead smuggled animals abroad to obtain foreign currency. To stem public discontent, it has airlifted in hundreds of thousands of cows and sheep, as well as extra supplies of beef and lamb from Romania, Australia and Brazil for cut-price sale to low-income families like Mokhtari’s.

Djavad Salehi-Isfahani, a non-resident senior fellow at the Brookings Institution, said the government shared some of the blame for Iran’s difficulties, describing its policy of providing subsidized dollars to importers as misguided.Instead, authorities should boost monthly cash transfers to poorer Iranians and let them decide how to spend the money, he said. “They’re trying to maintain consumption by the poor at a level that’s unrealistic given the environment that Iran finds itself in today.”

Attacks Escalate

For Iranians who recall the privations of the 1980s, when their country was mired in a grinding war with Iraq, or the coordinated international sanctions that isolated their economy prior to the 2015 nuclear deal, rationing is nothing new. Things are not as bad yet as they have been in only recent memory. The Islamic Republic shows little sign of buckling, but a bout of protests that swept through provincial cities even before sanctions resumed show how quickly the tide can turn. What began then as anger over the government’s handling of the economy, quickly escalated into a display of frustration with the political establishment. Rouhani’s attempts to claw more of the economy away from the military and other state institutions have been set back by U.S. President Donald Trump’s decision last year to withdraw from the 2015 international accord that curbs Iran’s nuclear program in return for an end to some sanctions. The economic crisis means Rouhani is facing pressure from the U.S. on one side, and hardliners, who say Iran is being punished for its concessions, on the other. 

With U.S. officials pledging to tighten curbs on Iran’s oil sales, and import waivers for several of the nation’s oil buyers set to expire in May, life is only getting harder. It’s a grim backdrop as Iran this week celebrates Persian new year, or Nowruz, a festival normally characterized by feasts, sweets and gifts. Central bank chief Abdolnaser Hemmati said last month families should adjust spending habits and prepare to see fewer foreign brands on the shelves. In an address to supporters in the oil-exporting region of Bushehr, Rouhani promised to expand welfare programs that already target 11 million poor Iranians. “You have to persevere, I guess. Tolerate things a little,” said Ali Sabaghi, a 53-year-old worker at a state-run garment factory who was in the meat queue with his wife. Their monthly income would cover just two weeks of expenses if they hadn’t cut back.

Another Day

Talk of belt-tightening does little to mitigate the frustration among those who’d hoped the nuclear accord would finally ease their isolation. “The U.S. has its own objectives. What they are, God only knows,” said Jaleh, 37, asking not be identified talking to foreign media. The value of her husband’s monthly pension, the sole income for a family of six, has slumped by more than half in hard-currency terms to USD 184. “We won’t starve or go hungry, but this still isn’t right, lining up like this.” The arrival of the store manager didn’t improve the mood. He turned away those who’d arrived too late for a numbered ticket or hadn’t realized they needed their ID card to buy the cheaper meat. They’d have to come back another day.

Photo Credit: Bloomberg

Iran Arrests 11 Who Stole $400m Earmarked for Imports

Iran's intelligence ministry said Monday it had arrested 11 "economic disruptors" who misappropriated some USD 400 million earmarked for essential goods and smuggled the money out of the country.

Authorities have been cracking down on those seeking to exploit the collapsing rial, which has lost around half its value against the dollar this year, in part due to the return of US sanctions.

"During these sensitive economic times, this network received IRR 47 trillion rials (USD 416 million at Monday's open market rate) of subsidized foreign exchange to import essential goods but instead invested them in some other countries," the intelligence ministry said in a statement published on its website.

The group, based in the western Kurdistan province, used "bogus companies, forged documents and bribery" to receive subsidized dollars from state banks, it said.

The Islamic republic has multiple exchange rates, with the government offering a subsidized rate of IRR 42,000 per dollar to importers of vital goods. Most Iranians must buy dollars on the open market, where the rate stood at IRR 110,000 on Monday, according to currency tracking site Bonbast.

At one point in September, the rial had fallen to IRR 190,000 per dollar, but the central bank has been pumping cash into the market in recent weeks to stabilize the currency.

Dozens of other "economic disruptors" have been arrested in recent months, and in November, a trader dubbed the "Sultan of Coins" and his accomplice were executed for exploiting the surge in demand for dollars and gold.

Many panicked Iranians rushed to secure their savings by buying foreign currency and precious metals in response to US President Donald Trump's decision in May to withdraw from the 2015 nuclear deal and to reimpose sanctions.

Photo Credit: IRNA

Iran Currency Hits All-Time Low Against Dollar

The Iranian rial hit another all-time low against the US dollar on Monday in spite of central bank efforts to stem the decline.

The rial has lost around 15 percent of its value on the open market in the past three days, bottoming at 128,500 to the dollar by Monday evening, according to Bonbast.com, which monitors Iran's rates.

The drop followed a speech by central bank governor Abdolnaser Hemmati on Saturday, in which he announced tighter restrictions on allocating foreign exchange reserves, said financial journalist Maziar Motamedi.

"Hemmati said that he wishes to be much more careful in allocating foreign currencies at government rates, signalling a potential forthcoming shortage of hard currency," he told AFP.

The rial has lost 70 percent of its value in the past year, primarily due to increased hostility from the United States and its withdrawal from the 2015 nuclear deal in May.

Official statements have done little to calm the markets.

Hemmati, who took over in August after his predecessor was sacked, "seems to have had a point when he said in (his inaugural speech) that he will try to minimise public remarks, as every comment coming from high-ranking officials aiming to calm the market has spurred negative reactions," said Motamedi.

The central bank puts tight controls on how much foreign currency is pumped into the system, and hands out a special government rate of 42,000 to certain importers, such as those buying essential goods like medicines.

Another factor may be demand from pilgrims heading to Iraq for the upcoming Arbaeen religious festival, attended by some two million Iranians last year.

The central bank has tried to calm the market, first by trying to end open-market trading in April, fixing the rate at 42,000 and shutting down exchange shops.

But that only sparked huge speculation and corruption on the black market, leading the government to sack the central bank chief and reverse the April measures.

Photo Credit: IRNA

Iran Gives Most Explicit Rejection Yet of US Talks

Iran gave its most explicit rejection yet of talks with the United States on Saturday, and accused Washington of an "addiction to sanctions" over its latest spat with Turkey. 

The US reimposed harsh sanctions on Iran on Tuesday following its May withdrawal from a landmark 2015 nuclear agreement, dealing a heavy blow to the already troubled economy.

US President Donald Trump has offered talks on a "more comprehensive deal" but Iran has baulked at negotiating under the pressure of sanctions and has instead leant on its increasingly close ties with fellow US sanctions targets Turkey and Russia.

Foreign Minister Mohammad Javad Zarif was asked by the conservative Tasnim
news agency whether there was any plan to meet with US Secretary of State Mike
Pompeo.  

"No, there will be no meeting," was the blunt response from Zarif. 

He said there were also no plans for a meeting with US officials on the sidelines of the UN General Assembly in New York next month, which both Iranian President Hassan Rouhani and Trump are due to attend. 

"On Trump's recent proposal (of talks), our official stance was announced by the president and by us. Americans are not honest and their addiction to sanctions does not allow any negotiation to take place," Zarif told Tasnim. 

It was Iran's most explicit rejection of talks to date, after much speculation that economic pressure would force its leaders back to the table with Washington or at least to engage in backroom discussions in New York.

Stop 'Bullying' Turkey

Earlier on Saturday, Zarif waded into the mounting row between Turkey and the United States. 

"Trump's jubilation in inflicting economic hardship on its NATO ally Turkey is shameful," he wrote on Twitter. 

"The US has to rehabilitate its addiction to sanctions (and) bullying or entire world will unite—beyond verbal condemnations—to force it to," he warned.  

"We've stood with neighbors before, and will again now."

Trump said Friday he was doubling steel and aluminum tariffs on Turkey as part of an ongoing row over the detention of American pastor Andrew Brunson and other issues.

The tensions have fueled a run on the Turkish lira, which dropped 16 percent to a record low on Friday, with Trump tweeting that the currency was sliding "rapidly downward against our very strong Dollar!"

Rial Pain

Iran too has suffered a major decline in its currency this year—in part due to US abandonment of the nuclear deal—with the rial losing more than half its value against the dollar since April.

Ironically, the rial strengthened in the two days leading up to the reimposition of US sanctions on Tuesday, after the government announced new foreign exchange measures giving greater freedom to trade dollars at market rates. 

But there has since been a fresh decline of almost 13 percent, with the rial at 106,200 per dollar on Saturday, according to currency tracking website Bonbast—approaching the record low of 119,000 that it reached on July 31.

Analysts say this is due to uncertainty in the market, with currency traders still unsure of the new rules and struggling to access dollars from the central bank.

Zarif met repeatedly with then US secretary of state John Kerry during the negotiation and implementation of the 2015 agreement—but those relatively warm ties were abruptly ended when the Trump administration came to power.

Rouhani said last week that Iran "always welcomed negotiations" but that Washington would first have to demonstrate it can be trusted.

"If you're an enemy and you stab the other person with a knife and then you say you want negotiations, then the first thing you have to do is remove the knife," he said in an interview on state television.

Photo Credit: IRNA

Iran's Currency Crisis Triggers Corruption Crackdown

With its currency plummeting ahead of the reimposition of US sanctions, Iran has responded with dozens of arrests and claims of an enemy conspiracy, but also signs of a push to confront corruption.

The Iranian rial has lost almost two-thirds of its value since the start of the year, and 20 percent in just two days since the weekend, hitting a record-low of 119,000 to the dollar. 

Many lay the blame on the imminent reimposition of US sanctions on August 6 following US President Donald Trump's decision to pull out of the historic nuclear accord, with Iranians rushing to store their savings in dollars. 

The central bank issued a statement on Monday that trod a familiar line, blaming "the enemies' conspiracies" for the rial's sudden decline.

This may not be purely paranoid fantasy. The US and its Gulf Arab allies are engaged in a "maximum pressure campaign" against the Iranian government, and there have been rumours that the United Arab Emirates has been curbing the physical supply of dollars to Iran, helping drive up prices.

But others say outside pressure is only effective because Iran's economy is so corrupt and poorly managed. 

Belatedly, the authorities appear to be waking up to the crisis. This weekend, the judiciary announced 60 people had been arrested for fraud and trying to undermine the banking system, with more to come.  

Spokesman Gholam Hossein Mohseni-Ejeie said several had direct ties to the government, allowing them, for example, to illegally import luxury cars, and could face the death penalty on Iran's infamous charge of "corruption on Earth". 

New Transparency

The arrests follow mounting anger against profiteers who use political connections to access dollars at artificially low rates, and then use them to import goods on the cheap, or simply sell them on the black market for a huge profit.

In a radical departure from usual government practice, in June the young telecoms minister Mohammad Javad Azari Jahromi exposed a group of mobile phone importers who were gaming the system. 

They had been granted USD 250 million at the cheap rate to import phones, he said, "but less than one third was used for the purpose," implying the rest was stashed away or sold.

The 36-year-old minister's move proved wildly popular on social media, but saw a backlash from some of his cabinet colleagues such as Industry Minister Mohammad Shariatmadari, who said doing something similar in his ministry would amount to "a war against the private sector."

Still, the episode showed a new willingness among Iranian officials to "be transparent and introduce accountability into the system," said Esfandyar Batmanghelidj, founder of the Europe-Iran Forum, a business network.

"Hopefully, more officials will understand that this is what the public is looking for."

'Full-Fledged Crisis'

The other priority is fixing the chaotic policies that have facilitated profiteering in the first place, particularly the disastrous decision in April to set a single, fixed rate for the dollar at IRR 42,000. 

To enforce the decision, the authorities shut down currency trading shops and made it illegal to sell dollars above the official rate, which only fueled a boom in the black market.

The government was forced to climb down in June, saying only importers of essential items such as medicines would use the cheap rate, while others would negotiate a higher price. 

President Hassan Rouhani sacked the central bank chief last week, and his replacement, Abdolnassar Hemati, has promised new currency policies "in the coming days". 

But trapped in fire-fighting mode and under fire from both conservatives and reformists over the deteriorating economic situation, Rouhani has done little to address deeper problems. 

"We're in a full-fledged crisis and that's taking all the attention. No one is talking about bank reform and investment and job creation," said economic journalist Maziar Motamedi of Tehran's Financial Tribune. 

Fearing a public panic, the government continues to insist that everything is under control, but has so far offered only vague promises that it will allocate more money to job creation and funnel more infrastructure projects to the private sector. 

"Just saying positive stuff is not helping. People have a hard time believing them," Motamedi said. 

"Everyone knows the structural problems are there but the government is tackling crises as they happen rather than preventing them."

Photo Credit: Wikicommons

Iran's Rial Hits Record-Low 100,000 to the Dollar

Iran's currency hit a record low on Sunday of 100,000 rials to the dollar amid a deepening economic crisis and the imminent return of full US sanctions. 

The unofficial rate stood at 102,000 rials by midday, according to Bonbast, one of the most reliable sites for tracking the Iranian currency. 

The rate was confirmed by a trader who spoke on condition of anonymity to AFP. 

The rial has lost half its value against the dollar in just four months, having broken through the 50,000-mark for the first time in March. 

The government attempted to fix the rate at 42,000 in April, and threatened to crackdown on black market traders. 

But the trade continued with Iranians worried about a prolonged economic downturn turning to dollars as a safe way to store their savings, or as an investment in the hope the rial will continue to drop. 

With banks often refusing to sell their dollars at the artificially low rate, the government was forced to soften its line in June, allowing more flexibility for certain groups of importers. 

The handling of the crisis was one of the reasons behind last week's decision by President Hassan Rouhani to replace central bank chief, Valiollah Seif. 

The currency collapse was encouraged by the US announcement in May that it was pulling out of the 2015 nuclear deal, that lifted certain sanctions in exchange for curbs to Iran's atomic program.

The US is set to reimpose its full range of sanctions in two stages on August 6 and November 4, forcing many foreign firms to cut off business with Iran. 

Photo Credit: Mehr

Tehran's Grand Bazaar Strikes in Protest at Rial Collapse

Traders in the Iranian capital's Grand Bazaar held a rare protest strike Monday against the collapse of the rial on the foreign exchange market as demonstrators also took to the streets.

At a crossroads in central Tehran, police fired tear gas at dozens of youths shouting slogans and throwing stones, an AFP photographer said.

"The demands of bazaar traders are legitimate. They want the situation on the foreign exchange market to be clarified once and for all," Abdollah Esfiandari, head of the historical covered market's administrative board, told ISNA news agency.

He said the protest was against "the high exchange rate, foreign currency fluctuations... goods being blocked at customs, and the lack of clear criteria for duties".

Shops had their metal shutters down throughout the market, said 45-year-old carpet trader who grew up in the area. "It's the first time in my life that I have seen this."

Iran's currency has plunged almost 50 percent in value in the past six months, with the US dollar now buying around 85,000 rials on the open market.

"Anti-riot police intervened" to disperse a protest in the Grand Bazaar, making two arrests, according to another carpet merchant.

Iran has faced mounting economic woes since the United States in May pulled out of a 2015 nuclear accord between Tehran and world powers that lifted international sanctions in exchange for a scaling back of the Islamic  republic's atomic program.

Photo Credit: Omid Vahabzadeh, Fars News

Iranians Flock to Empty Exchangers After Currency Fix

Confused and frustrated Iranians flocked to exchange offices on Tuesday after the government fixed a new rate for the dollar, only to find there were none to buy.

On Ferdowsi Street in central Tehran, home to dozens of banks and currency exchanges, many had hoped to find much cheaper dollars than the day before.

Overnight, the government had announced it was fixing the rate at 42,000 rials per dollar in a bid to arrest a slide in the currency, which has lost more than a third of its value against the greenback in six months.

But all along Ferdowsi Street, exchangers were turning hundreds of people away or had signs up saying: "We have no dollars to sell", while rate boards showed blank spaces for US and European currencies.

"Last night on TV I heard it's 42,000 so I came here to buy some for my son who is overseas. I've checked every exchanger but I couldn't find any dollars," said Tahmoores Faravahar, a 71-year-old retired oil sector worker.

A day earlier, some reported dollars selling at a record-high rate of 60,000 rials—pushed up by fears over tensions with the United States and a difficult political and economic situation at home.

"The truth is that the people can't trust the word of the government that their money will be safe," said a trader who sold currency on the street and asked to remain anonymous.

"People don't have hope in the political and economic situation in this country. People are confused and just want to keep their money safe by turning it into dollars."

One exchange office said it was never clear when the central bank would deliver dollars for them to sell.

"I don't know why they haven't come yet today," he said in the early afternoon. "But the new rate is good. The price was not normal these last few days."

'Everything is down'

Another street trader said the recent currency speculation was driven by the fact that people had few other options to make cash.

"If you look at the market, everything is down except the dollar. Real estate is down, the retail sector is down. People need income so it's a good idea to buy and sell dollars and make some money," he said.

"Last night, the government lowered the price and some people had a heart attack, but it won't stay like this."

He said exchangers would find ways to fiddle the system to get round the new fixed rate, even though Vice President Eshagh Jahangiri warned this would be considered smuggling.

"Just like the smuggling of drugs, no one has the right to buy or sell it... If any other exchange rate is formed in the market, the judiciary and security forces will deal with it," Jahangiri warned on state television.

Some said this had only created fear and confusion. "I want to sell some dollars but no one wants to buy them because the market is not safe," said a man in his forties, who did not give his name.

"The exchanges are worried about the situation because the government says it is smuggling if they sell above the new rate, so no one wants to sell," he said.

Meanwhile, for the many journalists covering the scene at Ferdowsi Street on Tuesday, there was another, unexplained phenomenon. "There are so many police here, but no one has asked us anything," said one local reporter.

Other media, including AFP reporters, said it was the first time they had been left to work without even being asked for their papers or being told to move on.

Journalists have felt less pressure since President Hassan Rouhani came to power in 2013, but police routinely hassle reporters and stop them filming in public. "It's like a dream," said one journalist as police walked past his video camera without batting an eye.

Photo Credit: Shutterstock

Iran's Rial Hits New Record-Low on Trump Fears

Iran's currency fell more than six percent against the dollar on Sunday, hitting another record-low, as fears of a US withdrawal from the nuclear deal continued to drive speculation.

The rial reached 55,200 to the dollar at the close on the open market—a drop of nearly a third in the past six months—according to the Financial Informing Network, considered the most reliable for fluctuations in the free rate.

"There is a clearly an increase of people buying dollars because they think the United States will pull out of the nuclear deal," said the head of an exchange office in Tehran, on condition of anonymity.

The gap with the government's official rate, which stood at 37,814 on Sunday, has continued to widen, threatening a return of high inflation which the government has battled to bring under control.

"The government can't do anything when there is this much panic. If the US exits the agreement, the Iranian currency could collapse even further and reach 70,000 to the dollar," said the exchange dealer.

The head of the central bank, Valiollah Seif, and Economy Minister Masoud Karbasian were summoned to parliament to discuss the issue last Monday.

Long queues have been seen outside exchange offices for weeks as uncertainty mounts over the nuclear deal which Iran reached with world powers in 2015.

President Donald Trump has threatened to walk away from the deal and reimpose sanctions by May 12—the next deadline for confirming US involvement—unless new restrictions are placed on Iran's nuclear and missile programs.

The rial stood at around 40,000 to the dollar in October, when Trump said he would no longer certify Iran's compliance with the nuclear deal, and has been falling steadily since.

Iran's government took drastic measures in February to stem the decline, arresting unlicenced exchange dealers and freezing speculators' accounts, but they have had little impact.

President Hassan Rouhani, who has staked his legacy on trying to revive the economy by rebuilding ties with the West, sought to play down the decline earlier this year, saying Iran was bringing in plenty of dollars through oil sales.

Photo Credit: AFP

Iran Currency Hits Record Low, Crashing Through 50,000 Mark

The Iranian rial fell to a record-low on Monday, breaking through the 50,000-to-the-dollar mark for the first time, with analysts blaming uncertainty stemming from Washington.

The rial has lost around a quarter of its value in the past six months to reach 50,860 against the US dollar according to the Financial Information Market, a trusted website for fluctuations on the open market.

The gap with the official rate, which stood at 37,686 on Monday, has continued to widen. Iran's government took drastic measures last month to stem the decline in the free market rate, arresting foreign exchange dealers, freezing speculators' accounts and raising interest rates, as well as buying up millions of dollars in a bid to lower the price.

But on the streets of Tehran, long queues continued to gather outside foreign exchanges in the build-up to the Nowruz New Year holiday, which is running for another week.

"The issue is psychological rather than economic. There's no reason to buy dollars except in the hope that you can sell them later at a higher rate," said Esfandyar Batmanghelidj, founder of the Europe-Iran Forum, a business network.

He said Iranians were reacting to worrying headlines from the United States, where President Donald Trump recently appointed two hardline anti-Iran figures to his administration: Mike Pompeo as secretary of state and John Bolton as national security advisor.

Many analysts believe Trump will pull out of the 2015 nuclear deal with Iran when it next comes up for renewal in May, bringing back crippling sanctions.

"I see many people looking to invest in neighbouring countries because this fear is spreading about the future of the JCPOA (nuclear deal)," said Navid Kalhor, a Tehran-based financial analyst.

Local officials have complained that Iranians are hoarding billions of dollars, while local banks run short of cash "I have friends who go to banks and ask for 15 or 20 million tomans (150 million or 200 million rials, $3,000 or $4,000) and they're told to come back in a week because they're out of cash," said Kalhor.

"Very Concerning"

The devaluation poses a major problem for President Hassan Rouhani's government, which had hoped to attract massive foreign investment in the wake of the nuclear deal.

Already facing huge obstacles from remaining, non-nuclear US sanctions, the collapsing currency will serve as another deterrent to potential investors, Batmanghelidj said.

"Even in an instance where an investor is willing to operate in Iran, the devaluation is very concerning. If you invest now and the currency falls even 15 percent, you have to discount that from your returns, and that's very difficult to hedge against," he said.

"This will be difficult for the government. There is very little they can do about the mentality of individuals."

The government has resisted unifying the official and free-market rates of the rial because it would mean more expensive imports and therefore higher inflation.

But analysts say the gap has distorted trade and fueled corruption. Perhaps the biggest challenge is that hoarding dollars has become a preferred way to store money amid economic uncertainty, especially after a housing boom stagnated after years of over-construction.

Iranian banks have tried to counter this by offering interest rates as high as 20 percent.

But speculation on the dollar has become an endemic problem. The Iran newspaper reported last month that 775 people's accounts had been frozen on suspicion of distorting the foreign exchange market with capital movements totaling 200 trillion rials (over $4 billion).

This has only fueled wider problems in the economy by discouraging investors from putting their money into businesses. "The situation in the economy right now is far from beautiful," said Kalhor.

Photo Credit: Wikicommons