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Iran imposes currency cap to combat rial plunge

October 06, 2012

Iranian rials being exchanged at a money changer's shop. – File photo by AFP
Iranian rials being exchanged at a money changer's shop. – File photo by AFP

TEHRAN: Iran sought on Saturday to reverse a collapse of its currency by imposing a fixed dollar rate, days after protests erupted over the rial’s plunge on the open market, said money changers who were refusing to comply.

The order came as ordinary Iranians struggled with growing economic problems that have caused a big jump in daily prices.

“We received an order from the Money Changers’ Association (under the control of the Central Bank) telling us to buy the dollar at 25,000 rials and sell at 26,000,” one exchange bureau employee told AFP.

“Nobody is selling at this price and we are not trading,” he said.

The bureaux in the central Ferdowsi area of Tehran were open for the first time since Wednesday’s protests, in which scuffles broke out between police and stone-throwing individuals.

Sixteen exchange market “disrupters” were arrested, according to prosecutors.

The rate imposed on Saturday sought to strengthen the rial by 25 per cent after it plunged 40 per cent to around 36,000 on Tuesday.

In the nearby Grand Bazaar – a historic maze of shops whose owners collectively enjoy political influence – stalls were also reopened. But gold coin vendors said they were refusing to sell because the currency market was still too volatile.

The Fars news agency reported that Bazaar prices had more than doubled in the past few days.

“A Samsung fridge which used to be sold for a 10 million rials is now ticketed at 20 million rials – and the retailer is not selling,” one housewife told Fars.

“He told me to jot down my number and told me I’ll hear from him when the prices have settled,” she said.

President Mahmoud Ahmadinejad has put the blame of the currency collapse on Western economic sanctions.

But his hardline critics say the fault mostly lies with his government’s monetary policies.

The US government has said sanctions relief could quickly occur if Tehran curbed its disputed nuclear programme, which Western countries suspect is cover to develop a nuclear weapons capability.

Iran’s leaders, who insist their atomic programme is exclusively peaceful in nature, have vowed never to yield to the pressure.