TEHRAN: Iran's central bank governor said on Sunday he was taking action to strengthen the national currency's rate of exchange, hit by inflation and concerns about sanctions.
Mahmoud Bahmani told state radio that the bank had stepped in on Saturday to reduce a 20 percent gap between the official rate and the price Iranians have to pay for foreign currency in exchange bureaus. He gave no details of what the measures were.
"We have taken measures to quickly bring down the price of foreign exchange because we felt that this was a fake rate and the minimum price that exists in the market increased due to demand for smuggled goods or unreal needs," Bahmani said.
Iranians rushed for dollars and other hard currencies after the government reduced the amount of interest payable on bank savings in April and amid rising inflation that threatened their buying power, economists said.
A new tax on gold coins also pushed many Iranians to seek foreign currency instead of their traditional safe haven, gold.
The central bank devalued the official rate by 10 percent in June and said it would use a raft of policies to ensure the currency did not slip further. But last week, with the official rate at 10,744 rials to the dollar, the market price broke the 13,000 rial mark.
Tehran's policy of maintaining a strong rial helps importers buy foreign goods but manufacturers have complained it hurting their ability to export.
On Saturday, with the official dollar rate at 10,730 rials, the market price had reduced to 12,730 and to 12,400 by Sunday, according the financial website Mesghal.ir.
Many economists believe the rial, which is loosely pegged to major world currencies under a "managed float", has not been allowed to devalue in line with inflation and is over-valued by at least 30 percent.
Copyright Reuters, 2011
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