Dollar surges in Iran as sanctions bite

[Bilal Mahmud المكافح المخلص]

The US dollar rate surged in Iran on Thursday as local banks halted the sale of foreign currency to private

Forex dealers say rise of greenback’s rate is due to latest sanctions on Iran as private individuals are first hit.

By Laurent Maillard - TEHRAN

individuals, with some dealers saying the rise was because of latest sanctions on Tehran.

The dollar was trading at 12,000 Iranian rials after hitting a high of 12,500 rials on Wednesday as buyers flocked to foreign exchange brokers when the banks stopped supplying hard currency with no explanation, dealers said.

Earlier this week the greenback was trading at 10,500 rials.

The slight dip on Thursday in the dollar rate followed a statement by the central bank in which it gave the assurance that Tehran has "increased its reserves" and would continue selling gold coins and foreign currency to professionals.

Central Bank Governor Mahmoud Bahmani told Iranian media on Thursday that Iran intends to bring dollar rates down to 10,600 rials by the end of next week.

In recent years the central bank has consistently ensured that the Iranian rial remains strong against foreign currencies.

But on Thursday, the banks kept a tight lid on their reserves, with only a few branches selling a maximum of 500 US dollars at the 10,500-rial rate to travellers showing passports and air tickets.

The banks have gradually refused to sell individuals hard currency in recent weeks without explanation or any government announcement.

The situation is reminiscent of the period during and after the 1980-88 war with Iraq, which did not ease until the 1990s.

However, most banks continued on Thursday to serve official money changers who link the tension over the dollar to international sanctions against Tehran.

"We can't send money transfers to Dubai any more. It's the work of sanctions. The rise in the rate is the direct result of that," one money changer who asked not to be named said.

Most banks in the United Arab Emirates, Iran's main trading partner, have stopped money transfers there since August after similar decisions by the United States and the European Union over Tehran's nuclear programme.

As a result the volume of trade between Dubai and Iran has been reduced by 50 percent, Morteza Masoumzadeh, vice president of the Iranian Business Council in Dubai said earlier this month.

Legal and illegal Iran-UAE trade amounts to billions of dollars annually.

The UN Security Council imposed a fourth round of sanctions on June 9 over Iran's controversial programme of uranium enrichment, which many Western states believe may be a covert bid to make a nuclear bomb, a charge Tehran denies.

The United States and European Union have since unilaterally imposed even tougher punitive measures, with provisions to penalise Tehran's trading partners.

"The authorities are trying to cushion the blow but I doubt they can fix it in the long term. The dollar rates will again go up," a money changer said.