DUBAI - Iran expects its security services to root out speculators who are to blame for a plunge of the rial to record lows, a minister said on Tuesday, after the currency lost about a third of its value in the past week.
Western economic sanctions against Iran's disputed nuclear program are ravaging its economy by reducing its ability to earn foreign exchange from oil exports. Iranians have responded by scrambling to change their rial savings into hard currency, fueling the slide.
The rial was trading at about 37,500 to the dollar in the free market on Tuesday, down from around 34,200 at the close of business on Monday, a foreign exchange trader in Tehran told Reuters by telephone.
Reflecting the turmoil in the market, other Tehran traders said the rial had dropped even further, to 38,000 or 40,000. The traders declined to be named because of the political sensitivity of the issue.
The government blames the accelerating drop on currency speculators and has tried in vain this year to stamp out black market traders.
"We have greater expectations that the security services will control the branches and sources of disruption in the exchange market," Iran's minister of industry, mines and trade Mehdi Ghazanfari said, according to the Fars news agency.
"Brokers in the market are also pursuing the increase in price because for them it will be profitable, and there is nobody to control them."
Ghazanfari did not elaborate on the identity of the speculators or how authorities could control them. Many businessmen and ordinary citizens in Iran blame the government for the currency crisis.
Government attempts to alleviate crisis backfire
The rial has been depreciating for over a year and has lost about two-thirds of its value since June 2011. Its losses have accelerated in the past week after the government launched an "exchange center" to supply dollars to importers of some basic goods.
Far from stabilizing the currency, the new center appears to have undermined it by tying the rate faced by those importers to the plunging free market rate. This threatens to fuel inflation, already put by the government at around 25 percent.
Although the currency crisis has shown no sign of forcing changes in the government, it has given ammunition to parliamentary critics of President Mahmoud Ahmadinejad, who have accused him of dithering and incompetence.
Ahmadinejad was due to hold a news conference in Iran on Tuesday afternoon, Iranian media reported without describing the topic.
Mohammad Reza Bahonar, deputy speaker of parliament, insisted on Tuesday that authorities had enough financial firepower to stabilize the rial. "The government has no lack of currency and can inject it into the market for a long amount of time," the Mehr news agency quoted him as saying.
But some analysts outside the country believe Iran's foreign reserves have begun to shrink, which could make it increasingly difficult for the country to finance its imports and may account for the apparent reluctance of the central bank to supply more dollars to the market in the past week.
On Sunday, Israeli Finance Minister Yuval Steinitz said Iran's economy was "on the verge of collapse" and estimated the government had lost $45-50 billion in oil revenue because of the sanctions.