BEIRUT

Middle East

Iran currency market remains paralysed

A man counts stacks of Iranian rials using a money-counting machine at a currency exchange shop in Kerbala October 4, 2012.REUTERS/Mushtaq Muhammed

TEHRAN: The open forex market in Tehran was still largely paralysed Sunday, four days after Iran's national currency dropped more than 40 percent prompting protests in the capital's symbolic Grand Bazaar.

Most official exchange shops were open in downtown but refused to conduct any business at a rate of about 28,000 rials per dollar, set by the Central Bank on Saturday in a bid to curb the currency's plunge.

The main specialised websites tracking transactions on the market did not post any rates.

The few transactions happening under the table, however, were in the range of 30,000 and 32,000 rials per dollar, witnesses told AFP.

The dollar rate being imposed on Saturday sought to strengthen the rial by 25 percent after it plunged 40 percent in value this week to around 36,000 in trade on Wednesday. But money changers froze all transactions, arguing they would lose money.

The official bank rate of the greenback at 12,260 rials is only available to the government and few businesses in areas considered essentials for the country.

Most companies or individuals must obtain the foreign currency on the open market. The rial has lost 60 percent of its value since the beginning of the year.

Iran is faced with extreme difficulties in selling oil and repatriating foreign currencies for its main export due to Western economic sanctions. A growing shortage of foreign currency as a result is preventing the central bank from supporting the rial in the open market.

Meanwhile President Mahmoud Ahmadinejad has put the blame of the currency collapse on the sanctions, and on Iran being cut off from the global banking system.

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

His government in late September introduced a new "exchange centre" where the rate is fixed daily at a small discount to the open-market rate for exporters to sell and importers to buy currencies blocked in accounts abroad.

According to the government-run daily IRAN, some 500 million dollars have changed hands in the past two weeks.

The new system is yet to have a positive effect on the rial.

 

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