Rial falls to lowest ever rate against US dollar

(27 Dec 2016) LEAD IN: The Iranian rial has fallen to its lowest ever rate against the dollar. The drop is bad news for savers in the Islamic Republic, but makes the country's exports more attractive to the rest of the world. STORY-LINE: Iran's currency is under pressure. This week it fell to 41,600 rials to 1 US dollar, its lowest point ever. The exchange rate was around 37,000 rials in mid November. On Monday, rates in Tehran's open currency were changing every few minutes. "Surely this (the fall of the rial) negatively impacts people's lives," says Tehran resident Babaei. "Lots of foreign goods are imported into our country, and many of the things people need come from abroad. All this needs foreign currencies, when the prices of foreign currencies are high goods will be more expensive." At a currency exchange shop in the capital, cashiers are well aware of the shifting value. Exchange shop owner Hamidipoor has noticed big changes in US dollar and Euro rates in the last four to six weeks. Iran's currency has depreciated by around 450 percent over the last ten years. It was buoyed by the 2015 nuclear deal when international sanctions against the country were lifted in exchange for it limiting its enrichment of uranium. But the accord's impact has faded and a host of reasons are contributing to the rial's descent. Since Donald Trump's election victory, the US dollar has been strengthening. Meanwhile, Trump's unelaborated campaign promise to renegotiate the Iran deal has sparked uncertainty. The currency drops means people's savings are losing value. But according to economic analyst Morteza Allahdad, it's good news for Iranian exports. "Export-oriented countries usually try to keep their currencies weaker so that they can export more goods to competitive markets," he says. "So an increase in foreign currency exchange rate is not necessarily bad, and if it is well controlled it will be to the betterment of the country's economy." Iran's government in the past has manipulated its currency market to cover government budget deficits. It does that through using the difference between the lower government exchange rate and the higher market exchange rate to gain rials from oil sales, a move known in the financial world as arbitrage. You can license this story through AP Archive: http://www.aparchive.com/metadata/youtube/4143541dfee7b0316bc780ee8e9974c1 Find out more about AP Archive: http://www.aparchive.com/HowWeWork

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