Iran Dumping the Dollar, Almost…………..
“TEHRAN - Iran's central bank chief said on Monday that the country has gained five billion dollars by replacing the US dollar with the euro in its currency basket, state-owned English language Press TV reported. "Iran has considerably reduced the total of US dollars in its currency basket," Mahmoud Bahmani said at a bankers' seminar in Tehran. Since October 2007, Iran has received 85 percent of its oil revenues in currencies other than the US dollar, the channel reported, adding it is seeking a substitute for the dollar for the remaining 15 percent. The Iranian government began preparing the ground for the dollar's replacement by the euro and other foreign exchanges in 2005, it said. The channel said the constant slide of the dollar coupled with the persisting economic crisis in the US has forced many countries to drop the currency in favour of a more stable and valuable one…..……”
The use of a basket is almost always preferable to one single currency for anchoring an exchange rate, be it the dollar or the euro. It all depends on the composition of the basket used. The worst policy would be to pick the composition of the basket based on politics; that may end up like cutting your nose to spite your face. Still, the Iranians cannot escape the dollar: petroleum is priced and largely paid in US dollars, but the market price mechanism for crude takes care of dollar fluctuations in that case.
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