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Iran's Currency Drops 8 Percent In Wake Of Protests, Fuel Hike

A man counts his banknotes and traveler's checks in Tehran, August 21, 2019

Iran’s currency rial lost more value Wednesday against major currencies reaching a low of 130,100 against the U.S. dollar.

One month ago, the rial was trading at around 120,000 to the dollar, but since an increase in gasoline prices and widespread anti-government protests in November, the currency has steadily lost about 8 percent of its value.

Each euro was trading at 145,000 rials and the price of gold also increased proportionately, after a period of relative stability.

Since 1978 the Iranian rial has depreciated almost 2,000-fold. Before the Islamic revolution one dollar bought just 70 rials.

Since then, the rial has steadily fallen but in the last two years its value has decreased fourfold, fueling a 40 percent inflation. The main reason that precipitated the decline was stringent U.S. economic sanctions, especially on Iran’s oil exports, which finance a substantial part of the government budget.

The falling value of the national currency directly leads to higher inflation. A lot of everyday consumer necessities and industrial raw materials are imported and when the local currency loses value imports become more expensive leading to higher inflation.