March 4, 2013 / 3:31 PM / 5 years ago

UPDATE 1-Iranian rial rallies after "positive" nuclear talks

By Yeganeh Torbati

DUBAI, March 4 (Reuters) - Iran’s currency has jumped about 9 percent against the dollar over the past two days due to government intervention and Tehran’s positive view of nuclear talks last week, currency websites and Iranian media reported on Monday.

The rial traded at around 32,500-33,500 to the dollar in the free market on Monday, compared with about 36,300 on Sunday, the media reports said.

The currency lost more than half its value last year, hitting record lows, as it was battered by U.S. and European economic sanctions on Tehran which slashed Iran’s oil revenues.

The rial has regained some strength in the past week. It rose about 2 percent last Wednesday after talks on Iran’s disputed nuclear programme with a group of world powers, known as the P5+1, ended in Almaty, Kazakhstan with an agreement to meet again.

Although no breakthrough was reported in the talks, the Iranian government in a statement afterwards said the talks were a “positive step”. Western officials were more wary.

Since Sunday, the Iranian government appears to have channelled larger amounts of dollars into the currency market than usual, boosting the rial, Mehr news agency reported without giving details.

“Those active in the currency and coin markets see the widespread provision of hard currency to the market and the positive environment of negotiations between Iran and the P5+1 group in Almaty as the main factors in the drop in the price of coins and currency,” the agency said.

The loss of oil revenues due to sanctions is believed to have depressed Iran’s foreign currency reserves, with private economists estimating they now stand at around $70 billion-80 billion, down from just above $100 billion at the end of 2011.

President Mahmoud Ahmadinejad, however, in a meeting with the managing directors of Iranian banks on Monday, said foreign currency reserves could be used to support the economy, the Fars news agency reported, indicating Tehran may be pumping hard currency into the economy.

“The banking system can play a positive and effective role in the flow of these supplies to stimulate the economy,” Fars quoted Ahmadinejad as saying.

Iran’s economy has suffered as oil revenues, which used to provide about two-thirds of government revenues, have plunged as oil exports more than halved last year, according to the International Energy Agency. Inflation officially hit 27.4 percent at the end of 2012 but is believed to be twice as high.

The government may be trying to boost the rial ahead of the Iranian New Year holiday later this month, which is traditionally a time when the government offers cash payments to households and attempts to lower prices of consumer goods.

Iranians can exchange their rials for hard currencies through loosely regulated money changers, though the government cracked down on the traders and arrested dozens of them after the rial’s plunge last year.

The Fars news agency quoted an unnamed money changer on Monday as saying the rial’s rebound this week had been so strong that many traders had stopped buying and selling currency until prices stabilised.

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