Iran’s currency fell below the psychologically important level of 1 million rials per US dollar on Tuesday and continues to trade lower, as Donald Trump's administration presses on with its “maximum pressure” campaign against Tehran with a new round of sanctions to curtail its revenue.
After dropping to a record low of 1,039,000 rials to the dollar on Tuesday, the rial continued to trade lower on Wednesday, with the exchange rate on the parallel market remaining above the 1 million mark at around 11am UAE time.
Tuesday’s drop resulted in more than halving of its value since President Masoud Pezeshkian took office last year, Reuters reported, citing Bonbast.com, which gathers live data from Iranian exchanges.
“The vast majority of the markets, probably 95 per cent plus, participate in the unofficial or parallel market for the Iranian rial that has now passed a million,” said Thomas Roden, senior foreign exchange dealer and head of business for emerging markets at foreign exchange platform Hubpay.
“It’s just due to all the uncertainty around [Mr] Trump over the past few weeks; he’s focused himself on the nuclear deal over there,” Mr Roden told The National.
Last week, the US Treasury Department announced new sanctions against a network of individuals and entities supporting Iran's oil exports. These include sanctions on 19 entities and vessels responsible for shipping millions of barrels of Iranian oil to Chinese refineries.
The move marks the fourth round of sanctions against Iranian oil sales since US President Trump issued the National Security Presidential Memorandum 2 on February 4, ordering a campaign of "maximum pressure" on Iran to curtail its oil revenue.
Mr Trump also expressed his willingness to engage with Iran and sent a letter inviting supreme leader Ayatollah Ali Khamenei and Mr Pezeshkian to talks over its nuclear programme. However, the offer was rejected by Tehran earlier this month, describing it as "deceptive" and "bullying".
The Iranian currency is expected to be under pressure unless there is some kind of a deal with the US in the coming days, which looks unlikely, according to Mr Roden.
"Iran's economy has been pretty severely impacted during the first term with [Mr] Trump and it looks like down that route again," he said.
"Oil is pretty much their only export. So generally, if oil prices fall, which they have over the past 12 to 18 months, it's going to have bad effects on the Iranian economy as well, and with the US promising to pump as much oil as they possibly can, that's not going to help."
Iran's economy has suffered under extraneous sanctions reimposed by Washington in 2018 after Mr Trump, in his previous term as president, removed the US from the Joint Comprehensive Plan of Action nuclear deal that could have provided relief to Tehran in exchange for limiting its nuclear enrichment programme.
The sanctions are yet to be lifted. The country is also on the Financial Action Task Force's blacklist.
Iran’s economy is projected to grow 3.1 per cent in 2025, from 3.7 per cent in 2024, the International Monetary Fund said in a report in January. It is forecast to further slow to 2.8 per cent next year.
