The value of the Iranian rial (IRR) has been pulverised in recent months and things didn’t get any better on September 25. By the end of trading, it stood at a crushing 170,000 to the dollar on the unofficial market, the only market that really counts to most Iranians. It has never ended a day weaker.

When one thinks that the currency started the year at 42,900, stood at 60,500 on May 1—just prior to Donald Trump’s announcement that he was launching a new sanctions-led economic assault on the Islamic Republic—and was trading at 112,000 as recently as the beginning of September, there is certainly no exaggeration in talking of a “death spiral”. The year-to-date loss of value is 74.8%.

Pinning specific rational reasons for the latest bout of rial depreciation is difficult amid the jittery market, but the icy relations between the US and Iran have worsened in recent days. First came the terror attack on the military parade at the weekend, leading to a sharp exchange of recriminations between Tehran and Washington, and then came the arrival of Trump and Iranian counterpart Hassan Rouhani in New York for the UN General Assembly—there was no sign of either side pressing for a meeting to ease tensions.

Trump late on September 25 took to the podium at the UN headquarters and trotted out his well-worn line that "Iran's leaders sow chaos, death and destruction". Calling on other countries to completely isolate Iran, he added: "They do not respect their neighbours or borders or the sovereign rights of nations. Instead, Iran's leaders plunder the nation's resources to enrich themselves and spread mayhem across the Middle East and far beyond."

Rouhani was expected to reply to Trump’s latest remarks on Iran in his own speech to the Assembly scheduled for later in the day.

Last chance saloon sovereigns
For Iranians looking to get rid of any IRR they were yet to change over to a different asset, gold sovereigns continued to be popular as a last chance saloon. The benchmark Imami sovereign was trading at an all-time high of IRR48.8mn

Most observers assessing Iran’s deteriorating economic fundamentals as it sinks back into recession point to the economic attack from the US, determined to force Tehran to the table to renegotiate the country’s role in Middle East affairs, as well as its nuclear and ballistic missile development programmes. However, commenting on the freefalling rial, renowned but usually sidelined economist Saeed Laylaz—a former advisor to reformist ex-president Mohammad Khatami and deputy secretary-general of the Executives of Construction of Iran Party—recently squarely laid the blame on Rouhani for his poor handling of Iran’s financial situation. He said: “We warned about the consequences of his policies regarding the market [but he didn’t listen].”

Some international economists say inflation in Iran must by now be realistically measured at somewhere over 250%.

The rial will come under even more pressure as November 5 approaches. On that date, US sanctions aimed at squeezing lifeline Iranian oil exports out of the world market take effect.