Riot Police Tackle Iranian Currency Collapse

The collapse of Iran's currency has sparked clashes with riot police in the country's capital amid signs of growing public anger.

The rial, which has lost a third of its value against the US dollar in just a week, has crumbled with President Mahmoud Ahmadinejad blaming sanctions against Iran over its controversial nuclear programme.

As a result, people and businesses are said to have been hoarding foreign currency and gold, exacerbating the economic turmoil as inflation rockets.

Witnesses have described how hundreds of officers stormed the capital's currency exchange district of Ferdowsi, arresting illegal money-changers.

A number of arrests and fires were seen and officers, who came under attack with stones, quickly broke up a protest.

The head of the national police, Esmail Ahmadi Moghadam, was quoted by the Fars news agency as saying that a special unit comprising of police chiefs and government economic officials had been created "to combat those perturbing the currency market".

The rial closed at around 36,100 to the dollar on Tuesday - making one pound worth 19,700 rials.

A week ago, it was trading at around 22,000 to the greenback and at 13,000 a year ago.

The money's plunge has greatly increased inflation in Iran, which is widely seen as far higher than the official 23.5% annual rate given by the central bank.

Food costs have spiralled to the concern of Iranian families with firms saying business has become nearly impossible.

The US government has said it sees the rial's collapse as proof Western sanctions are having a big impact on the Islamic republic's economy.

But Mr Ahmadinejad said that, even with the "psychological war on the exchange market", Iran would not be pressured into curbing its nuclear activities.

"If somebody thinks they can pressure Iran, they are certainly wrong and they must correct their behaviour," he said.

Iran, he claimed, had sufficient foreign currency reserves but experts say those are dwindling fast because of the bans on Iranian oil exports which had hurt monthly income to the tune of $5bn (£3.2bn) a month.