Iranian anti-government protesters gathered in Tehran on Wednesday to call on the government to change course following a slump in the country’s currency.

In a clear indication that economic sanctions against Iran, put in place by Western governments to derail Iranian nuclear plans, are beginning to bite, the Iranian rial lost a record 40 per cent of its value against the US dollar in under a week.

Around 100 demonstrators assembled in front of the Iranian central bank and in Imam Khomeini Square shouting that President Mahmoud Ahmadinejad was a “traitor” and blaming him for the financial pain. The main market in Tehran was closed, in what some reports suggested was a protest move. The bazaar was a key site for organisers of the 1979 Iranian revolution.

Riot police allegedly used tear gas to disperse the demonstration, while protesters and money-changers selling dollars were reportedly arrested in an official clampdown.

President Ahmadinejad denied that there was a currency crisis but blamed the rial’s deterioration on “psychological pressures” deriving from Western sanctions.

Last week, Ahmadinejad, whose domestic position is far from secure, gave what is expected to be his final speech at the United Nations General Assembly last week.