Vow to End Iran's Black Market Spurs Rush for Dollars in Tehran

(Bloomberg) -- Iranians flocked to foreign-exchange houses after authorities vowed to halt a currency slump by eliminating black-market rates, only to be turned away by currency traders awaiting instructions from the central bank.

Street dealers usually provide an alternative to Iran’s registered banks for Iranians looking to buy and sell dollars or euros. But they were absent from their usual corners in downtown Tehran on Tuesday after the government warned it would prosecute anyone who violated new rules setting the exchange rate at 42,000 rials to the dollar. The currency had weakened to 60,000 rials on the unregulated market this week, a record low.

The slide in the rial comes as the Trump administration nears a critical May 12 decision on its participation in Iran’s nuclear deal, and as political feuding at home raises pressure on President Hassan Rouhani to deliver a stronger economy for ordinary Iranians. Traders have also been accused of deliberately driving the currency lower with speculative bets.

Iran’s First Vice President Eshaq Jahangiri said late on Monday that authorities were moving to effectively end a two-tier exchange-rate system tolerated for several years. Authorities would treat any trading that didn’t abide by the new rules as they would contraband such as illegal drugs, he said.

But several licensed exchange-rate offices said they had yet to receive their daily instructions that set the exchange-rate against the dollar, and assign each an amount to sell.

“If we don’t have that rate, we can’t sell anything else,” said Hamid, a licensed currency trader who didn’t want to give his surname because of sensitivities of speaking with foreign media in Iran. “You can see outside these are all ordinary people, mothers, fathers -- some are with their kids. The feeling is that the dollar is a better investment.”

To contact the reporter on this story: Golnar Motevalli in Tehran at gmotevalli@bloomberg.net.

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Mark Williams

©2018 Bloomberg L.P.