Iran’s currency, the rial on Monday fell to a new record low against the US dollar on touching 1.3 million rials per dollar. This means one US dollar now costs 13 lakh Iranian rials. This indicates that the value of the rial has almost collapsed. The sharp fall has come amid pressure from international sanctions and rising regional tensions. As a result, inflation has increased, putting a strain on household budgets.
On the same day, the Indian rupee also weakened against the US dollar. It fell by 25 paise to close at an all-time low of 90.74. The decline was mainly attributed to uncertainty surrounding the India-US trade agreement and selling by foreign investors. The decline of Iranian rial comes amid mounting pressure from sanctions on Iran and rising regional tensions. The rial had already breached the 1.2 million mark less than two weeks ago and has now fallen even further. According to currency traders in Tehran, the dollar’s value had risen above 1.3 million rials, marking the sharpest decline since December 3, when the rial hit its previous record low.
Why has the Rial fallen?
Such sharp decline in the rial is directly impacting Iran’s economy. It has further increased the Inflationary pressure, by making food and other daily necessities expensive. This is putting an additional burden on the household budgets of ordinary people. The recent changes in petrol prices could further aggravate this inflation.
Iran’s situation reflects a serious lack of confidence among global investors and even Iranian citizens in their national currency and the country’s economic stability. Iran has been isolated from the international banking system (such as SWIFT), making foreign trade and transactions virtually impossible. The harsh sanctions imposed by the US have severely impacted Iran’s largest source of revenue, which is oil exports.
Challenge for India?
On the other hand, the Indian rupee also fell by 25 paise against the US dollar on Monday. It closed at a record low of 90.74 (provisional) per dollar. This decline in the rupee is due to uncertainty surrounding the trade agreement between India and the US and continuous selling by foreign institutional investors (FIIs). During trading, the rupee even touched its all-time low of 90.80 against the US dollar. According to Foreign exchange traders, the “risk-off” sentiment and strong demand from importers for dollar has further weakened investor sentiment. In the interbank foreign exchange market, the rupee opened at 90.53 against the US dollar. However, it later slipped to a record low of 90.80 during trading, a decline of 31 paise from its previous close.
NBT quoted HDFC Securities research analyst Dilip Parmar, as saying, “The rupee has hit a record low and has become the worst-performing currency among Asian currencies. Despite better-than-expected foreign trade figures, the rupee has not received any support.”
