TEHRAN - The government of Iran has announced plans to replace the US dollar with the euro in official financial reporting, according to state-run media.

The move on Wednesday is seen as part of efforts to circumvent restrictions on accessing the US currency amid tensions with Washington, as well as prevent market instability generated due to fluctuations in the value of Iranian rial against the dollar.

In a cabinet meeting, the government decided that all ministries, state organisations and companies should report based on a euro-rial exchange rate, which the Central Bank of Iran will be tasked to report frequently, state-run IRNA news agency said.

It was not clear when the decision would become effective, but business owners said they waited for the new policies to take effect.

"I assume if they use euro as the official currency, this will reduce the psychological impact of fluctuations of rial against the dollar," Newsha Sheikh Soleimani, a Tehran-based importer of raw materials for the tile and ceramic industry, told Al Jazeera.

"Our company trades mostly in euro, but still some of the invoices are issued based on rial-dollar exchange rate."

She said her firm had recently put on hold all transactions amid uncertainty over the value of foreign currency. "I welcome any move to bring back stability to the foreign exchange market."