Why does Iran’s national currency plunge again?



Iran's national currency has dropped in value yet again by nine per cent during the past three days against the USD which is soaring from 33,700 to 39, 000 rials.
According to official statistics, the dollar rate in Iran on January 23, 2012 was 21,000 indicating an 18, 000 rials difference compared to same date this year.
A sharp decrease in Iran's rial value took place when western sanctions on Iran's banking and oil exports came into force in late June. However after arresting tens of dollar dealers in the open market and also establishing the Forex Centre to provide limited USD to importers several per cent cheaper than the dollar rate in the open market, the USD rate on Iran's open market decreased a little in September and the rate has been kept almost unchanged until last Sunday.
Re-increasing the USD rate in Iran during the past few days has several internal and external reasons.
First of all, the Iranian government had provided importers of vital products such as food with the USD at an official rate of 12, 260 rials, but last week the Iranian government announced that supporting rice and meat imports with the USD at an official rate was stopped.
Regarding the issue that providing the USD through the Forex Centre is limited, then demands for it on the open market have certainly now increased.
The second reason is dismissing the governor of the Central Bank of Iran, Mahmoud Bahmani by the Supreme Audit Court, because his 'illegal financial transactions' on Jan.21.
And the third reason for souring the USD rate in Iran during last three days is the United States' new round of sanctions which will into force in two weeks.
According to this round of sanctions, Iran would be unable to transfer the exported oil money through any currency into the country. The oil money would be transferred into an internal bank in an Iranian oil importer's country and Iran can spend this money to import commodities from only those countries.
The U.S expanded the second round of exceptions sanctions for Iranian oil importers last December, arguing they continued to decrease Iranian oil import.
According to first round of these sanctions which were applied on June 28, 2012, Iran's Central Bank which is responsible for oil payments was put on the U.S. black list. Washington exempted Iran's crude oil customers from dealing with Iran's central Bank for six months, saying they decreased Iranian oil import "significantly".
Iran's oil exports have dropped by 40 per cent plunging down to 1.2 million barrels per day in 2012 compared to previous year.
According to the OPEC annual report, Iran's total exports in 2011 was $130.54 billion, including $114.75 billion petroleum exports which puts Iran's petroleum export shares at 87.9 per cent of the country's total exports.

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