Iran’s rial hit a record low against the U.S. dollar on Monday in a sign of concern about the country’s ability to attract foreign money after U.S. president-elect Donald Trump takes office.
The rial was quoted in the free market at 41,500 to the dollar, weakening from around 41,250 on Sunday and 35,570 in mid-September. Before this month, the record low was about 40,000, hit in late 2012, traders said.
Economists said there were several reasons for the slide, including the dollar’s strength against many currencies in the last few weeks, and uncertainty before next year’s presidential elections in Iran.
Government spokesman Mohammad Baqer Nobakht said on Monday that the rial’s drop was due to “psychological issues” and that the government hoped it would rebound within days.
Nevertheless, traders at some exchange houses in Tehran told Reuters they had not seen a sudden rise of dollar demand in recent weeks – suggesting the reasons for the rial’s tumble might be deep-seated.
Besides the free market exchange rate, Iran uses an official rate, now at 32,317, for some state transactions. The widening gap between the official and free rates has sucked hard currency out of the formal banking system; in an effort to counteract this, the government authorized some banks on Saturday to trade at free rates.