DUBAI - Iran's rial sank about 5 percent in trading against the US dollar on Monday after the central bank said it would change the currency's official exchange rate, prompting fears of another devaluation.
The rial was trading in the free market at around 21,510 per dollar, according to Persian-language currency tracking website Mazanex, down from about 20,440 on Sunday.
Central bank governor Mahmoud Bahmani said on Sunday he would announce a change to the government's "reference rate" of 12,260 rials to the dollar "within the next 10 days", Iranian media reported.
Iranian media speculated that the new reference rate might be between 15,000 and 16,000 rials.
Most Iranians are unable to obtain dollars at the official rate and must instead use the free market, which is much more expensive.
The US Congress passed a new package of sanctions against Iran last Wednesday, aimed at punishing banks, insurance companies and shippers that help Tehran sell its oil.
The legislation, agreed to by senior lawmakers of both parties in Congress, builds on oil trade sanctions signed into law by US President Barack Obama in December that have prompted Japan, South Korea, India and others to slash their purchases of Iranian oil.
Obama still needs to sign the bill in order for it to become law. White House officials said on Tuesday they were reviewing the bill.
The new bill imposes sanctions on anyone who invests in Iran’s petroleum or natural gas sector, who provides refined petroleum products to Iran, who joins in energy ventures with Iran or who transports Iranian crude oil, closing several existing loopholes.
The sanctions followed criticism from Republican presidential challenger Mitt Romney that the White House is failing to act strongly enough to stop Iran's suspected pursuit of nuclear weapons. Iran says its nuclear program is for peaceful purposes.
The bill was endorsed by the American Israel Public Affairs Committee, a powerful lobby group, which said the measure when coupled with existing US sanctions "represents the strongest set of sanctions to isolate any country in the world during peacetime."
The measure, in the works for several months, moved toward passage at the same time that the executive branch imposed further sanctions of its own.
The White House last Tuesday slapped additional penalties on foreign banks that facilitate the sale of Iranian oil, including the designation of a Chinese bank.
China's Foreign Ministry said the sanctions announced by Obama would hurt cooperation between China and the United States.
"The US has invoked domestic law to impose sanctions on a Chinese financial institution, and this is a serious violation of international rules that harms Chinese interests," ministry spokesman Qin Gang said in a statement.
Hilary Leila Krieger contributed to this report.