Iran cracks down on currency traders

An Iranian bank teller counts new 20,000 rial notes at Iran's Central Bank in Tehran March 15, 2004. Iran began to release the new 20,000 rial note equivalent to $2.38 shortly before the Iranian new year which begins March 21. REUTERS/Morteza Nikoubazl CJF/AA - RTRF83M

TEHRAN: Iranian authorities have arrested dozens of money changers in Tehran amid a steep decline in the Iranian currency that has sent the rial to a record low against the US dollar.

A video by state broadcaster IRINN on February 14 showed dozens of currency hawkers who usually are stationed across the street from the British Embassy in central Tehran being rounded up by police.

Iran’s currency has lost one-quarter of its value in six months, collapsing from 38,400 rials to the dollar in July to a record low near 50,000 in trading on the London currency exchange this week. The police crackdown prompted a small rebound in the currency to 48,220 in trading on Feb 14.

Tehran’s chief of police, General Hossein Rahimi, told local media that around 90 money changers were arrested on the streets of Tehran while 10 money exchange offices were shut down and another 16 offices received official warnings.

“The detainees, driven by greed, were attempting to disrupt the market and economic order,” Rahimi told the Fars New Agency. “The judicial system should firmly punish them.”

Financial analysts attribute the fall of the rial to several causes, including a decline in Iranian interest rates since September and worries about whether the United States will withdraw from Iran’s 2015 nuclear deal with world powers.

US President Donald Trump said last month that what he called “disastrous flaws” in the agreement must be fixed or he will pull the United States out of it.

Analysts say the rial’s accelerating decline in recent months has added to popular discontent in Iran, where authorities recently put down a wave of popular protests against economic hardship and corruption.

A weakening currency creates hardship for consumers by boosting inflation, which has been rising at nearly 10 per cent a year in Iran. Anger at the rising cost of necessities helped stoke last month’s street protests.

Iran’s central bank governor, Valiollah Seif, recently blamed speculation by currency traders for driving down the currency. Last month, he warned speculators not to bet against the rial, but his warning did not stop the currency’s fall.

The nuclear deal, which imposed curbs on Iran’s nuclear activities in exchange for the lifting of international economic sanctions, had raised hopes in Iran that the rial might strengthen back to levels that prevailed before global sanctions were imposed in 2012.

But the currency has continued to weaken, analysts say, particularly in the last year as the Trump administration adopted increasingly aggressive policies toward Tehran’s rulers.

Trump’s moves to stiffen US sanctions against Iran over its ballistic-missile development and intervention in regional conflicts have prompted many banks and businesses in Europe and Asia to be cautious about reengaging with Iran despite the go-ahead they got under the nuclear deal, analysts say.

But analysts say the fall in Iranian interest rates since September has also stoked the currency’s decline by making investments in Iranian bonds and bank deposits less attractive to investors.