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Iranian rial rises against dollar on back of Obama–Rouhani phone call - ASHARQ AL-AWSAT English Archive 2005 -2017
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Iranian banknotes and foreign coins are displayed by a vendor on a side walk of the Ferdowsi Street in Tehran, Iran. (AP)

Iranian banknotes and foreign coins are displayed by a vendor on a side walk of the Ferdowsi Street in Tehran, Iran. (AP)

London, Asharq Al-Alwsat—Iran’s turbulent currency market has reacted cautiously but positively to Iranian president Hassan Rouhani’s recent visit to New York and his telephone conversation with his American counterpart, US president Barack Obama.

Domestic media reported a rise in the Iranian rial against the US dollar on the open market only a few hours after news of the historic phone call between Rouhani and Obama was announced.

Reports indicated that the dollar was traded at below 30,000 rials on September 28, the day after Rouhani returned to Tehran, while only a week before that it was trading at 32,000 rials.

For ordinary Iranians, even this modest gain in the value of their currency is a promising sign. For many years, Iranians have thought war over their country’s disputed nuclear program likely, and have not been hopeful that the economic situation will improve.

Mohsen Salari, a member of Iran’s Association of Exchange Bureaus, said last week that the drop in the currency exchange rates was due to the potential easing of international tensions faced by the country.

Those good days for the Iranian rial did not last long, however: only a few days later, it became clear that expectations for the battered currency had been too high, as the rial leveled off against the US dollar following its moderate gains.

Economic experts believe that international sanctions against Iran are the main cause of the increase in the exchange rate, meaning that foreign currencies will still be traded at high rates unless sanctions are lifted.

According to Lotfali Bakhshi, a professor of economics at Allameh Tabatabaei University in Tehran, if the sanctions are removed, the price of the dollar against the rial would fall: “Unless the international sanctions [against Iran] are not lifted, we should not expect a further fall in the dollar [exchange] rate.”

Bakhshi added that the political situation is not necessarily promising at the moment, considering negative reactions by hard-line Iranian conservatives to Rouhani’s opening with the West over the past few days, and also given Obama’s comments to Israeli prime minister Benjamin Netanyahu during a meeting last week.

After meeting with the Israeli prime minister last Monday, Obama reiterated that the United States would “take no options off the table, including military options, in terms of making sure that we do not have nuclear weapons in Iran.” In response, Iranian foreign minister Mohamad Javad Zarif tweeted on Tuesday that “Obama’s presumption that Iran is negotiating because of his illegal threats and sanctions is disrespectful of a nation, macho, and wrong.”

“President Obama needs consistency to promote mutual confidence. Flip-flop destroys trust and undermines US credibility,” he wrote.

The constant rise in the value of foreign currencies against the rial over the past two years has prompted many people in Iran to invest in dollars and other foreign currencies. Many may now look to sell their dollars at a profit, although investment advisers are suggesting that market conditions may improve further, giving larger profits to Iranians willing to wait.