Iran’s Central Bank has announced that all money-exchange services in the country must trade foreign currency only within three to five percentage points of the Central Bank rate.

The new rule is an attempt to protect the spiraling national currency, which has plunged in recent weeks, causing the exchange rate to double.

In response to the news of Western sanctions against Iran’s Central Bank, many Iranians appear to be flooding the market, trying to convert their Iranian cash into foreign currencies.

Similar fluctuations have also hit Iran’s gold market.

The dollar has always been traded in Iran’s open market at a much higher rate than what’s officially posted by the Central Bank. The government is now trying to prohibit this practice in an attempt to maintain a single rate of exchange for foreign currencies.

Last week, President Mahmoud Ahmadinejad took a policy U-turn by approving an increase in bank interest rates. Mahmoud Bahmani, the Central Bank chief, announced yesterday that “foreign currencies will have one single exchange rate, and as of Saturday, the dollar can only be traded at 1,226 toumans.”

The dollar, which had reached well over 2,000 toumans on the open market, reportedly fell to 1,700 toumans yesterday after the announcement by the Central Bank.