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Iran currency continues free-fall, dropping 18% in two days

Iranians trade currencies at an exchange office in Tehran on December 28, 2016
STR (AFP)

Iran's currency continued its free-fall on Tuesday trading at a fresh record-low of 119,000 to the dollar, a loss of nearly two-thirds of its value since the start of the year as US sanctions loom.

The Iranian rial has plummeted in recent days as the country anxiously awaits the re-imposition of full US sanctions, the first of which will snap back starting August 6.

The rial hit 100,000 to the dollar for the first time on Sunday and continued its decline, losing 18 percent of its value in less than two days. On January 1, the dollar was worth 42,900 rials.

The government has been scrambling to mend the crisis, replacing its central bank chief last week and blaming the currency volatility on the "enemies' conspiracy". It vowed fresh countermeasures "in the coming days".

In April, the government tried to fix the value of the rial at 42,000, but black-market rates exploded as Iranians rushed to illegal traders, seeking to protect their savings by buying dollars, or investing in the hope that the rial would continue to fall.

With banks often refusing to sell their dollars at the artificially low rate, the government was forced to soften its line in June, allowing more flexibility for certain groups of importers.

AP Photo/Vahid Salemi

Iran has faced mounting economic woes since the United States in May pulled out of a 2015 nuclear accord between Tehran and world powers that lifted international sanctions in exchange for a scaling back of the Islamic republic's atomic program.

The US is set to reimpose its full range of sanctions in two stages on August 6 and November 4, forcing many foreign firms to cut off business with Iran.

Apart from the rial's collapse, the Iranian private sector has long been starved of investment, its banking system is crippled by bad loans and record levels of unemployment mean a third of under-30-year-olds are out of work.

Traders in the Iranian capital's Grand Bazaar held a rare protest strike in June, kicking off a wave of protests across the country that lasted for weeks.

Israel has reportedly been presented with intelligence which shows that the effects of the US withdrawal from the 2015 nuclear deal has also caused a greater rift between Iranian moderates and hardliners.

Iranian Labor News Agency via AP

On Monday, Israeli Prime Minister Benjamin Netanyahu released an English-language video subtitled in Persian in which he takes aim at Iran’s societal woes by telling the story of a fictional 15-year-old girl named Fatemeh and calls on the world to “help” the Iranian people suffering under “a regime that oppresses them and denies them a life of dignity, prosperity and respect.”

The video was the latest in a series of such clips in which Netanyahu appeals directly to the Iranian people whom he encourages to stand up to the regime.

The US has also pursued a similar strategy, aiming to pressure the Iranian regime into compliance with stringent US demands while encouraging the "shoots of liberty" sprouting across the Islamic Republic.

Pompeo launched his campaign against Iran on Twitter. He said, in remarks echoing Netanyahu’s own criticisms, that the government in Tehran and the Revolutionary Guards - the regime's elite armed body - had "plundered the country's wealth" in proxy wars "while Iranian families struggle."

Protests last month saw Iranians express rare public anger at the regime’s intervention in foreign conflicts throughout the Middle East, with videos posted on social media showing some protesters chanting “Death to Palestine,” “No to Gaza, no to Lebanon” and “Leave Syria and think of us” at some rallies

Tehran's backing of Lebanese militia Hezbollah, Syrian President Bashar Assad, the Houthi rebels in Yemen, Hamas and Islamic Jihad in Gaza, and Shi’ite militias in Syria and Iraq is estimated to cost some $1 billion annually.

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