Iran currency market in turmoil

AFP, Tehran, 4 Jan 2012 – Iran’s currency market was in turmoil Wednesday as the central bank tried to impose an exchange rate on dollar sales to shore up its beleaguered rial but some traders refused to sell at that rate.
Even though some media and a key website tracking the open-market rate of the currency (www.mesghal.ir) said the rial was now suddenly worth 21 percent more than two days ago, other media and some traders gave a dramatically different rate.
Some exchange shops had shut their windows, bluntly refusing to sell dollars at the new rate of 14,000 to the dollar they said had been imposed by central bank inspectors.
Instead, street money-changers in the centre of Tehran were walking around discreetly offering the much-higher rate of 15,700 to the dollar.
The IRNA and ISNA news agencies posted a rate of 15,600.
The confusion came as authorities reacted to an unprecedented slide in the rial on Monday, when it suddenly lost 12 percent of its value to hit a new low of 17,800.
The fall occurred after the United States at the weekend enacted new economic sanctions targeting Iran’s central bank and financial sector.
Iranian Commerce Minister Mehdi Ghazanfari on Tuesday said the central bank had been asked ‘to inject more foreign currency into the market, and the central bank has promised to do so,’ according to the official IRNA news agency.
He added that the government was considering ‘a number of measures to control the exchange market,’ without elaborating.
On Wednesday, there was no sign of that injection of foreign currency, only the central bank’s order putting a cap on the dollar’s value against the rial.
Iran insists the volatility of the rial is not the result of sanctions.
It ‘definitely has nothing to with sanctions,’ foreign ministry spokesman Ramin Mehmanparast said on Tuesday.
He imputed the sharp movements to domestic shifts in capital, for instance into the real estate sector.
The head of the central bank, Mahmoud Bahmani, said on Tuesday that the sudden fall of the rial was ‘due to psychological effects.’
‘I declare absolutely that the international sanctions have not created any economic problem for the country. The enemies know that and are trying to create psychological tensions. But we won’t play their game,’ Bahmani said.
He urged Iranians to refrain from buying dollars.
US and other Western nations have imposed sanctions on Iran’s economy over Tehran’s controversial nuclear programme.
Iranian economic experts have been called to a meeting at the central bank on Wednesday to address the issue of the rial’s volatility, Mehmanparast said.
According to OPEC, Iran gets 80 percent of its foreign revenues — around $100 billion over the past year — from oil exports.
The country’s budget has been calculated on the basis of 10,500 rials to the dollar.