Iranian rial at new low amid sanctions, ‘mismanagement’

Iran's currency, the rial, has plummeted to a new low as Western sanctions against the country over its alleged nuclear weapons programme take effect.

The rial plunged more than 15 per cent on Monday to a record low against the dollar. At midday, 34,500 rials bought $1 on the open market, compared with 29,600 rials on Sunday's close.

In the past seven days, the rial has has lost 25 per cent of its value; it is now, at best, worth only a quarter of what it was 18 months ago. And the freefall seems to have no end in sight.

Mismanagement of the economy by President Mahmoud Ahmadinejad is also being blamed for the tumbling rial and soaring prices of essential goods, particularly by his political opponents.

''Iran's years of state intervention in artificially sustaining the value of the rial, thanks to abundant petrodollars, has turned the currency into a barrel of gunpowder now detonated by sanctions,'' as one commentator put it.

To try to prevent such excessive weakening of the rial, Iran's central bank has long been implementing a "managed float" of the currency. The backbone of the policy is to inject enough petrodollars into the market to keep the rial's value against the dollar high.