"From our perspective this speaks to the unrelenting and increasingly successful international pressure that we are all bringing to bear on the Iranian economy. It's under incredible strain," State Department spokeswoman Victoria Nuland said.
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Iran's currency weakened to 34,700 to the dollar by the end of Monday's trading, according to the Mesghal.com website, a drop of 17 percent compared to the previous day's rate of 29,600.
The Mehr news agency said the rial fell 18 percent to 35,000.
The rial has lost more than 80 percent of its value compared with the end of last year, when it was worth 13,000 to the dollar.
Gold market in Tehran (Photo: AP)
Iran is suffering the effects of tough Western economic sanctions curbing access to its reduced oil exports, as the West seeks to force Iran to rein in its nuclear program.
"Iran is increasingly cut off from the global financial system, significant amounts of Iranian oil is also coming off the market," Nuland told journalists.
"The currency is plummeting and firms all over the world are refusing to do business with Iranian companies," she insisted.
"These are the most punishing sanctions we have ever been able to amass as an international community and they are very important for trying to get Iran's attention on the important denuclearization work."
Officials said after talks at the United Nations last week, that the European Union and United States are now set to toughen the sanctions while seeking to hold back Israel from a military strike.
The European Union will be first to step up sanctions as part of the international campaign of pressure alongside increasingly frustrating efforts to negotiate a halt to Iran's uranium enrichment.
"What we will do next is intensify sanctions," a top Western official close to talks said on the sidelines of the UN General Assembly. EU foreign ministers are to meet in Luxembourg on October 15 to discuss the measures.
"We don't think that Iran would ever have come to the P5+1 negotiating table at all if they weren't under the kind of pressure that we are talking about," Nuland added, referring to the Western powers leading talks with Iran.
The trio of European nations France, Britain and Germany, plus the United States, Russia and China - the so-called P5+1 group - has sought to negotiate with Iran, which denies it seeks a bomb.
Ministers from the six nations met in New York on Thursday and again called on Iran to "urgently" show the proof that its intentions are peaceful.
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