Tehran police move in to restore normalcy in exchange market

Police in Tehran have shut down several currency exchange shops and arrested a number of money changers suspected of being behind a recent turmoil in exchange rates.

They intervened after the plunge of the Iranian rial which has dropped to around 45,000 against the US dollar from 37,700 in mid-2017, Tasnim news agency reported on Wednesday.

It said Tehran prosecutor’s office had announced the arrest of several suspects while police had moved in to identify those behind the volatility in the exchange market.

“We are investigating those who impact the foreign exchange market and those who support them behind the scenes and today it has become clear who these individuals are,” the news agency quoted chief of the Iranian Police Criminal Investigation Department as saying.

Tasnim said free-market trading in the rial had almost ground to a halt in Tehran on Wednesday because of the tense security environment, with money changers ready to cut and run.

Some currency exchange shops in downtown Tehran around the Ferdowsi street stayed shut Wednesday after police closed down four centers over the last week and another on Tuesday.

Foreign exchange shops are seen at a trade center in Tehran. (Photo by Tasnim)

Over the week, President Hassan Rouhani and Governor of the Central Bank of Iran (CBI) Valiollah Seif have tried to soothe the market but those efforts have failed to arrest the rial’s slide.

A series of factors have contributed to the plunge to spin out of control where the CBI had been orchestrating a gradual depreciation of the rial since last year in order to ride out the inflation.

Ever since 2012 when the rial lost about two-thirds of its value against the dollar under former president Mahmoud Ahmadinejad, money exchange stores have mushroomed across major Iranian cities amid rising demand for foreign currencies.

A customer makes inquiries at an exchange shop in Tehran. (Photo by Tasnim)

On Monday, Seif warned that those speculating on the fall of the rial could burn their fingers because the rial was set to rebound in the coming months.

“Those who are investing their resources in foreign exchange will suffer losses in the end,” he was quoted as saying.

According to the International Monetary Fund, Iran’s foreign reserves are estimated at over $130 billion which are enough to check an uncontrolled slide of the rial.

President Rouhani said on Monday night that the recent turmoil in the currency market was due to temporary factors which would not last long.

Commercial bankers have linked the rial’s slide partly to seasonal demand for dollars, which rises around the end of the Persian year when many Iranians travel abroad.

Others say US President Donald Trump’s hostile rhetoric, including his recent threat to scrap a landmark nuclear deal with Iran, has played a role.