LONDON: Iran is intervening in the foreign exchange market and threatening speculators to engineer a dramatic recovery of its rial currency, easing pressure on the oil-exporting economy as Tehran defies renewed US sanctions.

The rial jumped to 105,500 against the US dollar on Wednesday from 117,000 at the end of last week - and 152,500 at the end of October, according to foreign exchange website Bonbast.com

The Financial Tribune and some other Iranian media reported on Tuesday that the rial had risen beyond 100,000 to the dollar. The foreign exchange market, however, has no single, official set of prices and traders often quote slightly different levels.

The rial’s rebound, from record lows around 190,000 hit in late September, is good news for a government that is struggling to prevent US sanctions on Iran’s oil, banking and other industries from pushing the economy deep into recession.

President Donald Trump reimposed US sanctions on Iran earlier this year after pulling out of world powers’ 2015 nuclear deal with Tehran. Washington has vowed “maximum pressure” on Iran’s economy to force it to accept tougher limits on its nuclear and missile programmes. Iran has ruled this out.

Rial weakness earlier this year disrupted Iran’s foreign trade and helped boost annual inflation fourfold to nearly 40 per cent in November. The weak currency has been a complaint of sporadic street protests since late last year.

If the government can support the value of the rial in coming months, it may be able to bring down inflation, improving living standards, and reduce capital flight from Iran.

“Because of the stronger rial, initial fears among many about the sanctions have eased somewhat, and fewer people are trying to buy dollars,” a Tehran-based economist told Reuters, declining to be named because of political sensitivities.

Iranian businessmen and economists contacted by Reuters said Iran’s central bank was now supplying large amounts of dollars to the market - not only inside Iran but in foreign locations where the currency is traded, particularly Iraq and Dubai.

At the end of last week, state news agency IRNA quoted central bank governor Abdolnaser Hemmati as saying the bank would do everything in its power to obey an order from Supreme Leader Ayatollah Ali Khamenei to strengthen the rial.

Published in Dawn, December 14th, 2018