What Is the Iranian Rial (IRR)?
IRR is the currency abbreviation, or FX symbol, for the Iranian rial, Iran's official currency. The rial, named after the Spanish real, first appeared in 1798 and is issued and managed by the Central Bank of the Islamic Republic of Iran.
Key Takeaways
- The Iranian rial (IRR) is the national currency of the Islamic Republic of Iran.
- While the rial is not officially pegged to another currency, its exchange rate stabilized at around 42,000 IRR per U.S. dollar beginning in April 2018.
- Iran's economy is largely based on petroleum refining and exports, but economic sanctions due to its nuclear program have stifled its position as a player in global finance and trade.
- IRR is sometimes considered to be a blocked or inconvertible currency since it is not freely traded on the globalforeign exchange market.
- There has been discussion and legislation in Iran to replace the rial with the toman, though this has not happened as of 2023.
Understanding the Iranian Rial (IRR)
One Iranian rial is made up of 100 dinars, but dinars are of no practical use because they are worth so little. Locally, the IRR uses the Arabic symbol ﷼. As of December 2023, one U.S. dollar is worth roughly 42,023 IRR.
While the rial was introduced in 1798, a currency called the qiran was used from 1825 to 1932. The rial was reintroduced in 1932. Its value plummeted following the 1979 Islamic revolution.
Iran is an influential member of OPEC, with a substantial percentage of the government's budget funded from the sale of oil. Banknotes of its currency are issued in denominations of 100, 200, 500, 1,000, 2,000, 5,000, 10,000, 20,000, 50,000, and 100,000 rials, while coins circulate in denominations of 50, 100, 250, 500, 1,000, 2,000, and 5,000 rials.
A stable exchange rate typically helps a country prevent capital flight or investment capital from fleeing the country in search of more stable returns.
The IRR is not pegged to the U.S. dollar or any currency, meaning it's a free-floating exchange rate; however, Iran's central bank implements currency controls to keep the exchange rate stable. Iran may be preparing regulations for bitcoin and other cryptocurrencies, according to reports.
The Iranian Rial (IRR) Convertibility
Since the early 2000s, the IRR exchange rate has fluctuated between about 1,750 IRR to one U.S. dollar (USD) to as high as 44,070 IRR to one U.S. dollar.
The rial, however, is not easily exchanged for U.S. dollars. Relations between the two nations are frosty, with the U.S. applying decades-long economic sanctions and trade restrictions against the Islamic Republic of Iran, mainly as a way to punish the country for its nuclear ambitions and history of state sponsorship of terror groups.
Price controls, subsidies, and other rigid government policies also weigh down the economy, and corruption is widespread.This often makes the IRR a non-convertible (inconvertible) currency, which is any nation's legal tender that is not freely traded on the globalforeign exchange market.
$366.44 Billion
The GDP of Iran in 2023, which is expected to grow to $386.22 billion in 2024.
For offshore investors seeking to engage in trade with nations such as Iran that have non-convertible currencies, they must do so through the use of a financial instrument known as anon-deliverable forward(NDF).
An NDFhas no physical exchange in the local currency. Rather the net of the cash flows is settled in a convertible currency, usually theU.S. dollar, which gets around the non-convertibility of the domestic currency. NDFsarecash-settledand usually structured as short-termforward currency contracts.
The Iranian Rial vs. Toman
Although the Iranian rial is the official currency of Iran, citizens of the country also use the Iranian toman. One toman is equal to 10 rials. In 2020, there was a discussion of replacing the rial with the toman as the official currency of Iran due to inflation, causing the rial to lose value against the dollar. One toman would be worth 10,000 rials; in effect, Iran would be cutting zeros off of its currency.
The country's parliament actually passed measures to replace the rial with the toman; however, as of the end of 2023, the rial still remains the country's official currency.
Which Countries Use the Iranian Rial?
The only country to use the Iranian rial is Iran.
How Do You Calculate the Iranian Rial Exchange Rate?
The best way to calculate the Iranian rial exchange rate is to use a currency converter, such as the one found on XE.com. Depending on the currency exchange rate you are interested in finding, you can choose that currency in conjunction with the rial and get the exchange rate.
Why Is Iran’s Rial So Weak?
The Iranian rial is weak primarily because of the political instability of Iran. The country operates an authoritarian regime that is unpopular amongst many of its citizens. It also has been accused of supporting terrorism, which has resulted in strict economic sanctions on the country, which has decimated its economy. Furthermore, the country depends heavily on oil. With sanctions, the country has difficulty selling its oil globally. Furthermore, when the price of oil drops, Iran's economy is hit hard.
What Is the Rial to Toman Exchange Rate?
One toman is equal to 10 Iranian rials.
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