To illustrate the slippery slope the Iranian currency is taking; in 2002 the exchange rate with the USA dollar was 7,900 rials per US dollar. This was after its convergence of the currency. Today, the value of the Iranian Rial is 12,283.4 to one USA dollar. That is a loss of nearly 100% of its value in ten years.
What does that mean to Iranians? Inflation. The cost of goods within the country has gone up and the value of its exports have gone down. The currency is creating chaos with Iran's balance of trade.
Currently the 'on the street' monetary exchanges in Iran are being shut down by police as a result of the slide of the Rial.
By Indira A.R. Lakshmanan on October 03, 2012
The U.K., France and Germany (click here) are pressing for new sanctions to bring Iran’s economy to its knees and curb its nuclear ambitions, according to several European diplomats, as rioting over the country’s tumbling currency suggests the existing sanctions are taking a toll.
In a confidential letter to the 27 EU member states, portions of which were provided to Bloomberg News, the foreign ministers of Europe’s three largest economies criticized Iran for its lack of openness over its nuclear program and called for raising the cost to Iran’s leaders of refusing to abandon what the U.S., Europe and Israel say is a covert nuclear weapons program. Iran says its program is solely for civilian energy and medical research....
It would appear, people are trading Rials for foreign currency to maintain the value of their own salaries. It seems obvious what is happening. People are paid in the national currency and immediately seek foreign currency to stabilize their loss of value. Regardless, of the exchange rate once the Rial has been converted to a foreign currency, like the Euro or the US dollar (depending on what holds greatest value that day), their personal losses stop because the foreign currency is stable.
By Ladane Nasseri - Oct 4, 2012 5:16 AM ET
It would appear, people are trading Rials for foreign currency to maintain the value of their own salaries. It seems obvious what is happening. People are paid in the national currency and immediately seek foreign currency to stabilize their loss of value. Regardless, of the exchange rate once the Rial has been converted to a foreign currency, like the Euro or the US dollar (depending on what holds greatest value that day), their personal losses stop because the foreign currency is stable.
By Ladane Nasseri - Oct 4, 2012 5:16 AM ET
Foreign currency shops in Tehran remained shuttered (click here) or failed to display prices today while hundreds of Iranian riot police remained in the downtown area a day after protests over the tumbling national currency.
Police units were visible around Ferdowsi and Manouchehri Streets, near one of the main areas for currency traders in the capital. Only a minority of exchange houses opened today....
I believe Iran is trying to stop the money exchanges at the street level because it is contributing to the slippery slope. This is one of the reasons China will not tamper with its currency. It has a multi-level currency system and it would cause chaos, too. Actually, if China did this, it would cause disruption in the global economy because of the penetrate China has to all world markets. So, like I have said before, currency is a tricky business. I think China is correct in holding the line of changing the way it does things.
Iran has a profound problem. It has to back peddle losses of its currency and it is facing sanctions besides. It is a very difficult circumstance in Iran, for the country and the poeple.
I believe Iran is trying to stop the money exchanges at the street level because it is contributing to the slippery slope. This is one of the reasons China will not tamper with its currency. It has a multi-level currency system and it would cause chaos, too. Actually, if China did this, it would cause disruption in the global economy because of the penetrate China has to all world markets. So, like I have said before, currency is a tricky business. I think China is correct in holding the line of changing the way it does things.
Iran has a profound problem. It has to back peddle losses of its currency and it is facing sanctions besides. It is a very difficult circumstance in Iran, for the country and the poeple.
