Iran’s currency rial continued to lose value against major currencies on Tuesday, reaching as low as 160,000 to the U.S. dollar at one point amid a quickly worsening coronavirus (COVID-19) epidemic and falling oil prices.
Under the pressure of U.S. sanctions and inability to sell crude oil Iran's foreign currency reserves have hugely depleted. For the first time since 1962 on March 12 Iran appealed to the International Monetary Fund (IMF) for emergency funding to help it fight the coronavirus outbreak.
The rial began a steep depreciation two years ago when the United States indicated it was leaving the 2015 nuclear deal and the specter of new sanctions emerged.
The rial lost more value in the past few days as the coronavirus epidemic spread across the country and oil prices fell. Just two months ago, the rial was trading at 130,000 and two years ago at 40,000 against the U.S. dollars. Tehran Stock Exchange (TSE) index is now experiencing a sharp decline while the price of gold is on the rise. On Tuesday alone the price of gold rose by one percent.
Iran’s economy is in the grips of a deep recession, with internal political instability and now a coronavirus epidemic bringing many small and large businesses to a standstill and sapping the public’s confidence.
In reaction to the continuing depreciation of the national currency in the past few weeks the Governor of Iran's Central Bank Abdolnaser Hemati on Sunday claimed there is no "real and effective demand" for foreign currency in the money exchange market. Hemati also claimed that more than $1.5 billion had been injected into the foreign currency market from non-oil exports in late February and March and as a result, exchange rates for importers were going down.
Hemati alleged that speculators in the foreign currency market who use "psychological operations through social media" in order to gain more profit were responsible for the depreciation rial.
Iranian officials always attribute the loss of the value of rial against the dollar to "psychological operations and bubble market".
The main reason for rial's fall in February was the decision of an international financial watchdog, the Financial Action Task Force (FATF) to call on all countries for countermeasures against Iran for not ratifying legislation against money laundering and financing of terrorism.