The Iranian rial, whose plunge triggered an inflation crisis, is gaining in the unregulated market after President-elect Hassan Rohani said he would seek to ease international sanctions crippling the economy.
The currency strengthened to 34,650 rial a dollar today in unregulated trading, marking a 4.6 percent appreciation from June 13, the day before Rohani’s surprise first-round victory, according to Daily Rates For Gold Coins and Foreign Currencies, a Facebook page used by businessmen based in Iran and abroad.
Rohani, who succeeds President Mahmoud Ahmadinejad in August, said yesterday that he will seek to improve Iran’s relations with the world and make the nuclear program more transparent. While Supreme Leader Ali Khamenei, 73, retains the power over national security, past presidents have been able to influence the tone of foreign policy. The rial had lost more than two-thirds of its value in the past two years as of April 30, according to the U.S. Treasury.
The Iranian currency is gaining because “the impression would be that Rohani’s election would mean there could be some scope for greater negotiation and compromise with the West,” Edward Bell, London-based analyst at the Economist Intelligence Unit, said by phone today. “Whether or not that can be born out by reality is still pretty uncertain. Immediately after the election, we’re still in the same economic conditions in Iran.”
Sanctions have pushed the Iranian economy into recession. The country’s gross domestic product is set to shrink 1.3 percent this year after contracting 1.9 percent in 2012, according to International Monetary Fund estimates. Inflation will average 27 percent this year, the highest among oil exporters in the Middle East, IMF data show.
Israel and the U.S. say Iran is trying to develop nuclear weapons capability. Both have threatened to attack Iran should other means fail to stop the Islamic republic from trying to obtain nuclear weapons. Iranian officials say Iran, a signatory to the nuclear Non-Proliferation Treaty, is entitled to conduct nuclear work and maintains its program is solely for energy generation and medical research.
Western powers may ease some sanctions if Rohani “is willing to allow greater inspection” of Iranian nuclear facilities by the International Atomic Energy Agency, Bell said. Still, the U.S. and the European Union are unlikely to lift sanctions on Iranian oil exports “until they see some real positive signs from Iran that it’s willing to make some major changes,” he said.
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