Iran's currency plunged 17 percent on Tuesday, hitting an all-time low of 37,500 against the U.S. dollar and extending a one-week decline that has lopped off more than a third of the currency's value.
The collapse of the rial marks yet another effect of the international sanctions that have hammered the $480 billion economy. Reports of ordinary Iranians exchanging the rials for gold have increased as trading volumes on Tehran's main gold exchange jumped nearly 20 percent in a single session on Monday.
Iran's government blamed the currency's tumbling value on "speculators."
Industry Minister Mehdi Ghazanfari told the state news agency the security forces would "root out" speculators behind the rial's decline. The currency has lost around 75 percent of its value in the past year, according to currency website mesghal.com.
Iran's alleged nuclear weapons program has escalated tensions in and around the Gulf region as President Mahmoud Ahmadinejad's second term at the head of government comes to a conclusion.
President Barak Obama told the United Nations General Assembly last week that the U.S. would "do what we must to prevent Iran from obtaining a nuclear weapon." And Israel has long maintained that Tehran is close to developing such a weapon, citing the developments in its uranium enrichment program, and has called for "red lines" to be imposed by the international community.
Iranian officials have steadfastly insisted the program is for domestic energy use.
Global sanctions on Iranian oil as a result of the program have been in place since July 1, banning the sale, transport and financing of all crude products. The European Union approved its own ban on Iranian crude imports, as well as the insurance of shipping Iranian oil, in late January.
Iran is the world's third-largest oil producer, according to the US Energy Information Administration, or EIA, with the fourth-largest deposit of proven reserves on the planet.
Bloomberg News reported in August that crude shipments have slumped by half -- around 1.2 million barrels per day -- as a result of U.S.-led sanctions, potentially costing the regime as much as $48 billion each year in oil revenues, an amount equal to about 10 percent of the economy. The EIA says oil underpins around half of government revenues.
In Asia, Iran's biggest market, sales have fallen sharply since the EU ban. China's January-July purchases of Iranian crude are down by around 22 percent, according to official figures, with similar declines reported in South Korea. Japan's crude orders are down nearly 40 percent.
U.S. lawmakers inked an expanded package of sanctions that will further restrict Iran's crude exports in August under the Iran Threat Reduction and Human Rights Act.
Economic embargoes first began in 1979 after students infamously stormed the U.S. Embassy in Tehran at the peak of the Islamic Revolution. Extensions were added under the Bill Clinton administration in 1995 and again under George W. Bush in 2007 and given even greater depth last year when Obama signed into law a bill that would freeze the U.S. assets of financial firms anywhere in the world that were found to be dealing with Iran's central bank.
The weakening rial could have an even deeper impact on the rate of inflation in Iran, which is currently running at around 23.5 percent. Unofficial estimates of cost-of-living increases suggest an even higher figure. Iran's unemployment rate is estimated at 14 percent.
The International Monetary Fund expects GDP to slow to 0.4 percent this year, after expanding around 2 percent in 2011.
Iran's central bank set up an exchange center last week to curb what it calls excessive speculation in the market for rials. Essential businesses in the Iranian economy can use the center to buy U.S. dollars at a fixed rate of 12,260.