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What's causing Iran's currency to collapse? (+video)

Iran's currency, the rial, hit a record low on Tuesday, threatening to worsen job losses and lower living standards within the Islamic republic.

The West is waging economic war on Iran in a vain effort to make it yield on its nuclear activities, President Mahmoud Ahmadinejad said on Tuesday, amid a steep plunge in the value of his country's currency.
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The Iranian currency fell to a record low on Tuesday as the Islamic republic struggles under the impact of Western economic sanctions and nervous citizens rushed to change their savings into hard currency.

The Iranian government blamed speculators for the rial's collapse and ordered the security services to take action against them.

President Mahmoud Ahmadinejad rejected criticism of his policies and insisted the country could ride out the sanctions, imposed because of Iran's nuclear programme, after the rial lost about a third of its value in a week.

"Enemies have managed to reduce our oil sales but hopefully we will compensate for this," a combative Ahmadinejad told a news conference. He suggested domestic criticism of him was part of a "psychological war" against Iran.

"According to a report from one of the security services, 22 individuals are ringleaders of the recent turmoil in the currency market, and since these individuals are known, security institutions must act," Ahmadinejad said.

The rial tumbled to a record low of around 37,500 to the U.S. dollar in the free market on Tuesday, from about 34,200 at the close of business on Monday, foreign exchange traders in Tehran said. On Monday last week, it traded at around 24,600.

Late on Tuesday, some Iranian media reported that the currency had recovered to around 32,000, but traders contacted by Reuters could not confirm this, saying they had stopped dealing because of the extreme volatility.

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