TEHRAN, Aug 6: Iran’s currency plunged five per cent on Monday in street trading after the central bank announced an imminent decision to revise upwards its official fixed exchange rate used as a market reference.

Money changers were exchanging one US dollar for 21,450 rials at midday, significantly higher than Sunday's 20,440 rate.

Central bank Chief Mahmoud Bahmani said on Sunday he would announce an increase to the government’s fixed rate of 12,260 “within the next 10 days” to help cope with “international developments,” the Donya-e-Eqtesad daily reported.

“There is no reason to spend our money when we are under sanctions. We should remember that we might need to manage the country for a long time with this money,” he was quoted as saying.

Iran is confronted with increasingly severe effects from Western economic sanctions curbing its ability to export oil and conduct financial transactions. The sanctions aim to force the Islamic republic to roll back its disputed nuclear programme. But Iranian leaders vow they will not cede to the pressure.

The rial has lost around half of its value from last year, following the announcement of the new US and the EU sanctions. In an interview with the official IRNA news agency, the head of Iran’s Bank Tejarat, Mohammad Reza Ranjbar Fallah, predicted on Monday that the new fixed rate would be in the range of 15,000 to 16,000 to the dollar.

Fallah, whose bank is targeted by the sanctions, also said the official rate would be used only as a back-up from now on. The new fixed rate “would minimise the role of the official rate in imports and would only be a supporting element,” he said.

The government’s lower fixed rate is currently accessible only to approved businesses importing essential goods and to pilgrims travelling to holy Muslim sites. —AFP