Iran’s currency, the rial, plunged to an all-time low on Sunday, exchange traders said, as Western nations sought to further isolate the country economically and diplomatically.

The rial’s latest slump coincides with Canada’s unexpected decision to sever ties with Iran and talks among European member states about introducing further embargoes against Iran.

The United States and its allies have imposed sanctions since the beginning of the year over Tehran’s nuclear activities which they suspect are part of a drive to develop a weapons capability, allegations which Iran has repeatedly denied.

The open-market dollar rate stood at around 24,000 rials, traders told Reuters by telephone on Sunday, a slump of nine percent over three days.

On Thursday, the rial traded at about 22,000 to the dollar, they said.

“It’s really bad,” a currency trader who asked not to be named said by phone from Tehran. “It’s the worst it’s ever been.”

Another trader said his company had suspended business because of the volatile rates. This was the lowest he had ever seen the rial sink, he said.

“We’re not selling,” he said by phone. “The price has to stabilize so we can actually buy some dollars,” he said.

The Iranian government has characterized the sanctions as all-out economic war.

“We are fighting with the world in an economic sense,” the governor of Iran’s central bank, Mahmoud Bahmani, said on Sunday, the Iranian Students’ News Agency reported. “The conditions we are in are war conditions.”

The direct cause of the sharp fall is unclear but one trader speculated it was because of the government’s difficulty in getting hold of foreign currency due to U.S. sanctions which directly target the central bank.

On Friday, the Canadian government announced it had closed its embassy in Tehran citing Tehran’s nuclear program, hostility toward Israel and its support for ally Syria.

Simultaneously, the foreign ministers of Britain, France and Germany urged fellow EU member states to ratchet up sanctions against Iran. The bloc imposed a total ban on purchases of Iranian crude at the beginning of July.

The news comes as the government searches for ways to shore up its faltering currency and unify its open market rate with the official rate that is fixed at 12,260 rials to the dollar.

The subsidized rate is available only to government departments and some importers of priority goods.

Last month Bahmani suggested he would change the official reference rate “within 10 days”, news that sent the rial’s unofficial price tumbling 5 percent.

In an apparent change of policy, officials from the Ministry of Economics have since proposed a currency bourse open to major traders, which they say would increase transparency and stability.

Private traders are arguing against the proposal, saying it amounts to a government takeover of the market.

Source: Reuters