DUBAI (Reuters) - Iran on Saturday authorised the central bank to intervene in the foreign exchange market in defence of the rial, state television reported, after the currency fell to repeated record lows in recent weeks following the reimposition of U.S. sanctions.
The rial has slumped due to a weak economy, difficulties at local banks and heavy demand for dollars among Iranians who fear Washington’s withdrawal from a landmark 2015 nuclear deal and renewed U.S. sanctions could shrink Iran’s oil exports and derail its economy.
A set of U.S. sanctions targeting Iran’s oil industry is due to take effect in November. President Hassan Rouhani has called the sanctions an “economic war” against Iran.
A top government body, headed by Rouhani and the heads of parliament and the judiciary, “gave the central bank governor the necessary authority to intervene in the foreign exchange market and to manage it”, state TV said.
“The central bank will intervene in the foreign exchange market through banks and authorised exchange shops and carry out the necessary measures to control the exchange rate of hard currencies,” the television quoted the body as saying.
The central bank will “announce the rate of exchange in the foreign exchange market at an appropriate time,” the body added.
It was not immediately clear whether Saturday’s announcement meant the government would return to a policy, abandoned in recent months, of injecting hard currencies into the market.
The Iranian rial hit a record low on the unofficial market on Wednesday, and was offered for 186,000 rials to the dollar according to foreign exchange websites. The rial has lost approximately 75 percent of its value so far this year.
On Saturday, the first trading day of the week, the rial recouped some its losses to be traded at around 174,300-174,500 per dollar, according to foreign exchange websites 2gheroon.ir and bonbast.com, which track the unofficial market.
The official exchange rate is 42,000 rials per dollar and is used mostly for imports of state subsidised basic goods such as food and medicine.
The top government body also gave final approval to a move allowing money exchange shops to import foreign currency banknotes, and requiring non-oil exporters to repatriate their hard cash earnings within three months to be reinvested or sold in a regulated secondary market to importers.
Officials have said Iran was moving to ease regulations on imports of hard currency bills and gold by exchange shops, after Washington in August re-imposed sanctions on Iran’s purchases of dollars, its trade in gold and precious metals, and its dealings with metals, coal and some software.
Reporting by Dubai newsroom; Editing by Andrew Bolton and Alexandra Hudson