Iranian anti-government protesters gathered in Tehran on Wednesday as demonstrators called for the government to change course following a slump in the country's currency.

In a clear suggestion that economic sanctions against Iran, put in place by Western governments to derail Iranian nuclear plans, are beginning to bite, the Iranian r ial 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, while 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" from Western sanctions.

Last week Mr Ahmadinejad, whose domestic position is far from secure, gave what was expected to be his final speech at the United Nations General Assembly, during which he criticised accused international double standards. Iran is set to vote for his successor in June.