Rial below official rate as Iran forex trade reopens

Business resumed Wednesday on Tehran's open foreign exchange market, with dealers offering major currencies well above a cap that the central bank imposed to halt the slide of the Iranian rial. Police and security personnel cracked down on the market in the centre of the Iranian capital a week ago, closing exchange bureaux and rounding up unlicensed money-changers. Shopkeepers and exchange bureaux have since reopened, but they were doing little trade as they considered the central bank rate of 28,500 rials to the dollar as unrealistic, witnesses said. The US dollar was being offered for 33,000 rials, they said. A few black market dealers had been offering the greenback at around 34,000 rials on Tuesday. Iran has been facing a growing shortage of foreign cash, preventing the central bank from being able to support the rial on the open market, where it has lost more than two-thirds of its value since the beginning of the year. The crisis was sparked by increasingly tough oil and banking sanctions imposed by the West over Tehran's disputed nuclear programme. The punitive measures have hindered the Islamic republic's ability to repatriate much of the foreign revenues generated by its vital oil exports. Parallel to the open market, the official dollar rate in Iran has been fixed for several months at 12,260 rials, but that is reserved for government agencies and a few companies importing food or other goods judged essential. In an effort to get around the banking sanctions and the pressure on the open market, the government in late September created an "exchange centre" that puts importers in contact with exporters, to exchange funds using a rate calculated at a small discount to the open market rate. But so far there is no sign of the pressure lifting off Iran's currency.