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Iranian Currency Drops 7.5 Percent After U.S. Designates Guards As Terror Organization

A man exchanges Iranian tials against US dollars at an exchange shop in the capital Tehran, August 8, 2018

Reports from Iran indicate that in the wake of the U.S. decision to designate the Islamic Revolution Guard Corps as a foreign terror organization the Iranian currency took a nosedive at the end of the trading day on Monday.

The rial fell 7.5 percent to 144,000 rials to the dollar. On Sunday, April 7 the Iranian currency was trading at 134,000 to the dollar.

The head of Iran’s central bank on Sunday tried to talk up the rial, anticipating the U.S. announcement, but it did not help on Monday once Washington designated the IRGC as a terrorist organization.

The move signaled to the local market that there might be more trouble down the road for Iran. The IRGC controls a large share of the economy in the country and a tight economic noose around its business interests and a bigger chance of military escalation creates uncertainty for businesses and the people in Iran.

The Iranian currency has been on a downward spiral for more than a year, falling over fourfold against major currencies.

The currency slide contributes to inflation and lowers consumer purchasing power, at a time when the country needs to deal with an unprecedented flooding disaster.

As in the past, officials tried to blame hidden hands “in neighboring countries” trying to crush the rial, but in fact it is heightened uncertainty that lowers the Iranian currency.

The rial has steadily declined in the 40 years since the establishment of the Islamic Republic. In 1978, before the revolution that toppled the monarchy, one dollar traded for 70 rials, compared with 140,000 now.