For the first time .. Iran reduces the value of the riyal

For the first time .. Iran reduces the value of the riyal



23-05-2018 12:32 PM

Iran has officially devalued its local currency against the dollar for the first time since it began efforts to crack down on the currency free market last month, hinting it would allow some exchange rate flexibility under US sanctions.

With the riyal falling to record lows ahead of US President Donald Trump's decision to withdraw from Iran's nuclear deal, Tehran said in early April it was working to unify the exchange rate in both official and free markets at 42,000 riyals to the dollar.

The authorities threatened anyone trading the riyal at other exchange rates with arrests and sent police to watch exchange offices in major cities.

But this week, the central bank began to arrange a very slow devaluation of the riyal, which is likely to leave the currency moving gradually according to supply and demand, as long as a free fall of the currency could be avoided.

The central bank set the exchange rate at 42, 50 riyals per dollar on Monday and 42,60 riyals on Tuesday, according to its website.

The governor of the Central Bank of Iran, Laila Seif, hinted at further declines, saying the riyal could move up to 5 or 6 percent in the fiscal year ending March 20, 2019.

Saif was quoted as saying at a meeting of bank executives. The central bank will set foreign exchange rates based on inflation in Iran, which is just over 8 percent at the moment.

By allowing the riyal to fall, Iran may be able to boost the export sector and facilitate the attraction of foreign currency flows to the country to dispel some of the damage to the economy caused by sanctions, which Trump threatens to impose.

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