September 25, 2012 / 3:42 PM / 8 years ago

Iran rial hits record low despite new effort to stabilise it

DUBAI, Sept 25 (Reuters) - The Iranian rial tumbled 5 percent to an all-time low against the U.S. dollar on Tuesday, suggesting a fresh effort by the government to stabilise the currency may have backfired.

The rial was trading at 26,500 to the U.S. dollar on the open market on Tuesday afternoon, according to Persian-language currency tracking website Mazanex, compared to a closing price of 25,200 rials on Monday.

The Iranian currency has lost more than half its value in the past year because of U.S. and European sanctions against the country’s banking sector and oil exports, aimed at forcing Tehran to give up its disputed nuclear programme. Iranians have rushed to informal money changers to convert their savings into hard currencies, accelerating the rial’s slide.

The fresh drop on Tuesday followed the government’s launch on Monday of a foreign exchange centre that provides importers of some basic goods with dollars, at a rate about 2 percent cheaper than the open market rate on a given day. The announced rate at the centre on Tuesday was 23,620.

Officials said they would use proceeds from Iran’s sales of oil and petrochemicals to supply dollars to the centre, which would reduce pressure for the rial to fall as importers’ demand for hard currency was satisfied.

However, the scheme may have backfired because most importers of basic goods now have to buy dollars from the centre at a rate which is close to the open market rate and linked to its volatile movements.

Earlier this year the government told importers of basic goods they could buy dollars at a fixed rate of 12,260 rials, but it has provided only a limited amount of hard currency at that level.

A moneychanger in north Tehran, who did not want to be named because of the sensitivity of the issue, said by telephone that he had stopped selling dollars because of the volatility.

“It’s natural that if importers’ rate goes up, the open market rate will go up too,” he said.

Another factor behind Tuesday’s drop may have been the U.S. Treasury’s determination on Monday that Iran’s state oil company is an “agent or affiliate” of the elite Islamic Revolutionary Guard Corps, which the United States has long put under sanctions for what it says are terrorism and human rights abuses. The designation enables Washington to put new sanctions on foreign banks dealing with the National Iranian Oil Co.

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