Varying rates were quoted for the greenback during the later hours of trading day before it finally stood at 118,500 rials, 500 rials higher than Tuesday’s close. It fetched 120,000 rials on Thursday.
The euro was worth 136,000 rials, up 1,000 rials compared to Wednesday’s trade and the UK pound sterling was quoted at 152,000 rials.
Market analysts attribute the gaining of the rial to efforts undertaken by the Central Bank of Iran to revive the national currency and pave the way for launching the regulated forex market by pulling rates in the CBI-run Nima (Persian acronym for Integrated Forex Deals System) and FX open market closer, Financial Tribune reported.
The positive development comes at a time when observers predominantly held the view that the rial would fall further after losing more than half its value last summer after US President Donald Trump in May 2018 abandoned the 2015 Iran nuclear treaty and imposed new and tougher economic sanctions.
Bloomberg on Thursday reported how the rial ran against all expectations and could partially regain strength against major foreign currencies despite the mounting US restrictions.
“If there was a currency you wouldn’t expect to be strengthening, it would be Iran’s”, the major news outlet said.
Ascending Order
But the truth is that the rial is soaring on the country’s parallel market, gaining 8% against the dollar this week alone to extend its advance since early May to 30%. That’s according to Bonbast.com, an unofficial local website that monitors the currency. The appreciation is borne out by a Bloomberg survey of street traders in Tehran.
The beleaguered Trump administration has been toughening sanctions on Iran, namely oil exports -- the lifeblood of its economy. Trump, who regularly touts the success of his penalties, tightened them further last month after Tehran shot down an American drone in the Persian Gulf. Iran’s currency “is under siege thanks to us,” Trump told his cabinet in January.
The rial’s resilience is evidence that Iran, which is implementing a range of import restrictions to preserve foreign exchange, has “hunkered down,” according to Steve H. Hanke, a professor of applied economics at Johns Hopkins University in Baltimore.
There have also been changes to the currency system. The CBI maintains an official exchange rate of 42,000 rials to the USD. But it recently tried to get more exporters to use the trading platform Nima, which was set up last year. Rates on Nima have been allowed to weaken in recent months to encourage more export companies to repatriate their currency earnings.
The measure helped ease pressure on the rial on the unregulated parallel market, which is used by small businesses and individuals. There, the currency has almost converged with the Nima rate of around 115,0000.
For all the gains, the rial still remains weak by 32% in the past year. The recent appreciation could be short-lived given the scarcity of foreign currency in the market and the declining prospect of the US easing sanctions any time soon.