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Iranian currency drops over 10 percent: 1 U.S. Dollar going for 2000 Tomans

Iran's national currency hit a new low on Saturday afternoon trading at 20,000 rials to the U.S. dollar in the black market, ISNA reported. This is over 10% drop compared to prices from the day before. Similarly the price of the gold coin has reached 1 million tomans for a full size coin. (10 rials = 1 toman)

While the currency exchange shops post the official exchange rate for dollar which set by the government at 14,000 rials, they have effectively stopped all trades. It is also reported that trading in Tehran Bazaar has come to halt since merchants are waiting for currency to stabilize so they can set their prices accordingly.

Minister of Economic Affairs and Finance Shamseddin Hosseini said on Wednesday that President Mahmoud Ahmadinejad is opposed to a plan which calls for paying higher interest on interest-bearing accounts to encourage people to deposit their savings with banks in a bid to control gold and foreign exchange markets, which are currently in turmoil.

The posted sign on a currency exchange shop says "We are not buying or selling dollar."

Over the past few weeks, a wave of panic buying by Iranian households and small investors has swept gold and currency markets, and the cash floating around has thrown the markets into total disarray, forcing officials to adopt stopgap measures to curb volatility.

The recent flurry of sanctions announced against Iran by U.S. and European allies, which for the first time target Iran's Central Bank, is being credited as the main reason for Iran's currency coming under pressure.

In 1979, 1 rial equaled $0.0141. The value of Iran's currency declined precipitously after the Islamic revolution because of capital flight from the country. In July 1999, 9430 rials amounted to one dollar. However, the value of the rial had become more stable since 1999, as the economy of Iran was growing rapidly and away from the dollar zone.

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