The Iranian currency on Monday losy more value against the U.S. dollar and other major currencies in Tehran foreign exchange market, trading 166,000 rials at midday against one greenback.
The coronavirus pandemic and the decline in crude oil prices have over the past two months contributed significantly to the depreciation of the Iranian currency and a hike in the price of gold in the market. On February 19 when Iran reported its coronavirus outbreak and first two deaths one U.S. dollar traded for 143,800 rials in Tehran.
Since Sunday the dollar to rial exchange rate has gone up by 10,000 rials which is considered as a huge increase for a single day.
The withdrawal of the United States from the nuclear agreement in May 2018 and the re-introduction of U.S. sanctions accelerated the devaluation of the Iranian national currency. The sanctions have cut Iran's crude oil exports from more than 2 million barrels per day by almost 90%.
in 2015, when Iran was signing the nuclear agreement with world powers the rial was trading at 32,000 against the dollar. At today's rate the rila has fallen more than five-fold against major currencies.
Some traders expect the rial to loose more value in the coming days due to the increasing demand in the market from small investors. Price of gold and gold coins, which many Iranians buy for investment, have also increased in recent days. Many small investors have flocked to the stock exchange market which has seen a growth of nearly 200% in the past year giving rise to concerns of a bursting bubble.
The huge depreciation of the rial since the Islamic Revolution of 1979 prompted the government of President Hassan Rouhani to propose a monetary reform to slash four zeros from the national currency and renaming the national currency as toman. The Iranian Parliament last week passed the bill which will take effect once the Guardian Council approves the law.
The government does not expect the reform to have any impact on inflation which currently stands at nearly 40%, but it says slashing the zeros will make financial transactions easier and reduce the cost of printing banknotes.