New monetary policies? (Illustration)
The Central Bank of Iran (CBI) intends on converting about €45 million of its reserves into dollars and gold, Tehran's media reported.
According to reports, the new monetary policy will be carried out in three phases, with the first phase – converting euro reserves into dollars – already underway.
CBI Chief Mohammad Bahmani hinted of the move in April, saying the Islamic Republic will turn to dollars in view of the euro's poor performance.
Iran has been converting its currency reserve into euros since 2006 – a move meant to meet both Iranian President Mahmoud Ahmadinejad's anti-US policies, and the American currency's weakness.
The recent change stems from the financial crisis which hit the eurozone bloc following Greece's financial struggles.
The euro-dollar rates have devalued by 20% since the beginning of 2010. Iran's foreign currency reserves, which are estimated at $100 billion – half of which are in euros – had to sustain the loss.
These major losses deteriorated the Iranian economy – which is struggling with international sanctions on top of domestic difficulties – further.
Doron Peskin is head of research at Info-Prod Research (Middle East) Ltd