Iran likely to devalue rial as US sanctions restrict FX inflow: Fitch

03/01/2019 Argaam

 

Iran is likely to devalue the official exchange rate of rial or cut subsidized imports this year, as US sanctions restrict foreign currency inflows, Fitch Solutions said in a new report on Thursday.

 

"The re-imposition and further tightening of US sanctions will drastically reduce oil export earnings and restrict cross-border financial transactions, leading to a sharp slowdown in foreign currency inflows into Iran," it added.

 

The report cited the government's proposed budget for FY2019/20, which is yet to be approved by parliament, referencing an exchange rate of 58,000 rials against $1, which implies that a devaluation could be in the pipeline.

 

While the report views no major shift in Iran-US relations over the quarters ahead as Iranian authorities look to "wait out" the Trump administration, Fitch does not rule out either a "resumption of negotiations or a drastic escalation of tensions".

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