Iranian currency drops 11 percent, hitting new record low against dollar

TEHRAN, Iran (AP) — Iran’s national currency fell by 11 percent Saturday amid the government’s refusal to sign off on a move to raise bank interest rates, state news agencies reported.

The semiofficial Fars news agency said the the country’s currency, the rial, was trading at nearly 20,000 to the U.S. dollar on Saturday on the black market, compared to 18,000 rials a day earlier.

The rial was trading at around 10,500 riyals to the U.S. dollar in late December 2010.

The Iranian currency strengthened last week after Iran’s Money and Credit Council approved an increase in bank interest rates to 21 percent to absorb liquidity into the banks. Traders said President Mahmoud Ahmadinejad’s refusal to give the green light to raising bank interest rates has prompted a new devaluation of rial.

Iranian police have rounded up currency exchangers, saying any transaction of foreign currency is considered “smuggling.”

The government has ordered a rate of 14,000 rials per U.S. dollar to money exchange shops. But there is no exchange of currency based on the rate.

Iran’s central bank declared last week that trading foreign currency outside of banks and licensed currency exchange operations was banned.

The currency came under heavy pressure after new U.S. sanctions targeting Iran’s central bank and oil industry were approved. Shortly after President Barack Obama signed the sanctions into law, the rial lost about 13 percent of its value relative to the dollar. The sanctions have not yet gone into effect.