Iranian currency rides on optimism over nuclear deal
Optimism over the possibility of a nuclear deal with the United States boosted the Iranian currency for the second time in the past two weeks.
The rial rose to 259,000 on Saturday and 253,000 rials on Sunday against the US dollar in Tehran’s unofficial foreign exchange market. In December, at the height of the uncertainty surrounding the nuclear talks in Vienna, the rial had fallen to nearly 310,000 rials against the US dollar.
The strengthening of the national currency has also lowered the price of gold, especially coins that many Iranians buy as an investment to protect their savings.
The Etemad newspaper on Sunday attributed the rial’s strengthening to a Reuters report on Thursday that said Iran and world powers negotiating for the reinstatement of the 2015 nuclear deal (JCPOA) had drafted a deal that included, among other things, the unblocking approximately $7 billion. Iran’s assets frozen in South Korean banks since 2018. A nuclear deal would lift many US economic sanctions and allow Iran to freely export oil, the country’s main source of income.
Iranian Foreign Minister Hossein Amir-Abdollahian and the US State Department said during the week that substantial progress had been made. Anonymous Western diplomats have told media that a deal could potentially be reached very soon. A deal in Vienna could provide the cash-strapped Central Bank of Iran (CBI) with resources it could inject into the foreign exchange market to prop up the rial and finance imports.
Last week, the Iranian delegation, including officials from the Central Bank of Iran (CBI) and the National Iranian Oil Company (NIOC), traveled to Seoul to discuss the release of Iran’s frozen assets and the resumption of oil trade when and if US sanctions are lifted.
Japan Petroleum and Energy Corporation ENEOS also announced its willingness to resume Iranian oil imports within two to three months of any relaunch of the JCPOA.
A trade source told London-based media outlet Argus last week that in anticipation of sanctions being lifted, NIOC is reaching out to key customers to discuss resuming crude sales, especially condensate. which Iran has placed in floating storage.
The rial began to lose value against the dollar and other major currencies in late 2017 when former US President Donald Trump made it clear he was serious about pulling out of the deal. 2015 and subject Iran to draconian sanctions that would severely limit the country’s access to petrodollars.
The rial has increased eightfold since 2017 and in the last weeks of 2021 even fell to 310,000, but in the last six weeks, despite the uncertainty surrounding the reinstatement of the agreement, it has regained part of its value due to growing optimism about a nuclear deal and the lifting of US sanctions.
Much higher oil exports to China in recent months could have injected more hard currency into the market.
China apparently imported an average of 850,000 barrels of Iranian-sanctioned crude oil and petroleum products worth more than $20 billion in 2021. Despite US sanctions, China has continued to purchase increasing quantities quantities of Iranian crude.