Iranian riot police clash with protesters over currency plunge

DUBAI (Reuters) - Riot police clashed with demonstrators and arrested money changers in Tehran on Wednesday in disturbances over the collapse of the Iranian currency, which has lost 40 percent of its value against the dollar in a week, witnesses said.

Police fired tear gas to disperse the demonstrators, angered by the plunge in the value of the rial. Protesters denounced President Mahmoud Ahmadinejad as a "traitor" whose policies had fuelled the crisis.

In a clampdown on the unofficial foreign currency market, a number of traders selling dollars were arrested after authorities ordered security forces to take action against those they see as speculators.

The rial has hit record lows against the U.S. dollar almost daily as Western economic sanctions imposed over Iran's disputed nuclear program have cut its export earnings from oil, undermining the central bank's ability to support the currency.

Panicking Iranians have scrambled to buy hard currency, pushing down the rial whose increasing weakness is hurting living standards and threatening jobs.

"Everyone wants to buy dollars and it's clear there's a bit of a bank run," said a Western diplomat based in Tehran. "Ahmadinejad's announcement of using police against exchangers and speculators didn't help at all. Now people are even more worried."

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