Other major currencies also posted big losses. The UAE dirham was quoted at 65,550 rials on Saturday down 2.6% compared to a session earlier.
The euro and the UK pound sterling declined 2% and 1.9%, respectively and were quoted at 283,130 rials and 318,450 rials, according to the Persian-language economic website eghtesadnews.
Market observers ascribe the pattern of decline to political developments in United States where president-elect Joe Biden will be inaugurated on Wednesday.
His victory in the highly contested Nov.3 election has triggered a downward spiral in Iran's financial markets amid cautious optimism that the national currency would be revived soon after the harsh economic sanctions are eased by the incoming Biden administration.
The American currency surged to a record high of 320,000 rials in the run-up to US vote in late October as dealers and speculators betted on the victory of the highly controversial Donald Trump, visibly the worst president in recent US history who lost his job on Nov. 3.
For most speculators the possibility of a second Trump White House could translate into mounting pressure on Iran's economy and further harm the long struggling rial.
Referring to the heightened US economic pressures since 2018, the governor of Central Bank of Iran Abdolnasser Hemmati said in a note on Thursday that "expectation of higher prices emanating from sanctions was a determining factor in the past two and a half years."
Implicitly pointing to the change of guard in Washington, Hemmati said "the rising expectations continue to ebb and forex rates would move toward their real value."
Trump announced the economic blockade after abandoning the Iran nuclear agreement in May 2018, which has taken a toll on Iran's oil export, the lifeblood of Iran's economy.
Rouhani’s Statement
In his social media note, the senior banker reflected on statements by President Hassan Rouhani last week about the impact of the expected release of billions of blocked forex assets overseas on currency prices.
During the weekly Cabinet meeting on Wednesday, Rouhani said his government is determined to curb forex rates, reiterating that the "current forex rates are not real".
He recalled perpetual efforts by his government to unfreeze billions in forex assets overseas, saying "the dollar would fall to 150,000-160,000 rials if our overseas currency resources are unlocked.”
"Access to the blocked resources will enable the CBI to better manage the forex market," Hemmati wrote, adding that the central bank is committed to safeguard its foreign currency reserves. He did not elaborate.
Forex rates skyrocketed twice after the new US sanctions. The first time was in the spring of 2018 when the rial lost more than 70% with the dollar rising from 50,000 rials to 180,000 rials in October 2018. Later the rial strengthened but was traded between 130,000-160,000 rials throughout the year ending in March 2019.
In the latest shock in May 2020, volatility was spurred by shortages arising decline in foreign trade due to the Covid-19 plague.
Gold in Dives
Impacted by the decline in forex rates, as is the norm in Iran, and amid decline in world markets, the domestic bullion market plunged deeper.
Emami gold coin lost almost 4% or 4 million rials on Saturday to drop to 102 million rials. Compared to Wednesday's close, the popular coin lost more than 7%. In line with the steep rise in forex rates last October, the coin reached a record high of 163 million rials.
On Saturday, the Half Bahar Azadi coin was down by 3 million rials to reach 55.5 million rials -- a 5.5% daily decline. One gram of 18-karat gold fell below 10 million rials on Saturday and was worth 9.99 million rials -- down more than 3% compared to the earlier session.