Economy, Business And Markets

Rial Keeps Sliding

Business & Markets Desk
Rial Keeps Sliding
Rial Keeps Sliding

The Iranian rial plunged against all major currencies on Sunday as the US dollar surged to a 2-1/2 year high as rial’s selloff accelerated into its second week.

Investors fears of economic uncertainty were exacerbated when West Texas Intermediate oil tumbled to $66.15 on Friday, a 10 percent drop, following the meeting of the OPEC cartel. The drop gave rise to speculation that the government would struggle to cover its budget deficit.

The rial was facing some heat last week due to uncertainties and dropped further after OPEC decided to keep its current crude oil production output despite a global oversupply.

The greenback surged by 2.95 percent to 35,230 rials versus the rial by 11:26 GMT Sunday, to cap its largest one day gain since 26 June 2013.

The dollar keeps breaking resistance levels. It broke above the 35,000 rials mark on Sunday and the 34,000 rials level on Saturday.

This is the fourth straight month that the dollar is advancing against the rial. The US currency is up by 22.5 percent versus the rial this year. This surge further eradicates hopes that the central bank will unify the multiple foreign-exchange rate regime by the end of the year, ending March 20, 2015, as promised previously by the bank’s governor. Currently there is a 31.2 percent gap between the official and market price of the dollar.

The euro also advanced against the rial despite fears of deflation pushing the currency down in the FOREX market on Friday. The European currency soared by 3.37 percent to 43,600 rials on Sunday. The euro has gone up by 7.1 percent in the past seven days according to data compiled by the Financial Tribune.

Sterling also extended its gains by 1.23 percent versus the rial and traded at 53,480 rials, by 11:26 GMT on Sunday, despite falling on Friday, as the British pound was pushed down against the dollar and fell two thirds of a percent to $1.5645.

The Azadi bullion coin jumped up to its highest in seven months, after extending its three-week rally, despite gold slipping in the international market on the rising dollar.

Azadi went up 1.8 percent and hit 9,620,000 rials by 11:26 GMT on Sunday, as safe haven demand and rising dollar outweighed bullion’s three-day drop at the international market which ended on Friday.

“Soon equilibrium will return to this market,” CBI Governor Valiollah Seif claimed on Sunday, in response to current market conditions.