Iran's semi-official ISNA reports that Iran's national currency has fallen by six percent in a day after President Mahmoud Ahmadinejad refused to sign off on a move to raise bank interest rates.

ISNA said the rial was trading at 18,000 to the U.S. dollar on Wednesday in the black market compared to 16,950 on Tuesday.

Iran's currency came under heavy pressure earlier in January after new U.S. sanctions targeting Iran's central bank and oil industry were approved.

While the rial rebounded after the central bank said it would step in to stabilize the market, the boost has been short-lived.

Nonetheless, critics say the Obama administration has not implemented the full array of sanctions available to it due to fears of causing a spike in oil prices as the US enters its 2012 presidential election cycle.

Israel's Minister of Strategic Affairs, Moshe Yaalon, said on Tuesday that "re-election concerns" were driving policy in Washington rather than global security concerns.

Iran has threatened to close the strategically vital Strait of Hormuz, through which much of the world's oil flows, should its oil industry be targeted with more sanctions.

Nonetheless, European Union foreign ministers are hammering out the details of a new round of sanctions targeting Iran's oil program ahead of a January 23 meeting.

"We must not be put off further sanctions by bluster or statements from Iran," British foreign minister William Hague said. "This is an increasingly dangerous situation that Iran is developing a military nuclear program."

Iranian traders said Ahmadinejad's refusal to sign off on a new rule raising bank interest rates has sparked new worries Tehran would be unable to cope with increased economic pressure from the West.

Earlier this week Israeli Prime Minister Binyamin Netanyahu said Iran's economy was "wobbling."