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Iran maneuvers to win back public trust in the rial

While the Iranian rial has jumped 25% over the past week, there are major questions about whether the Central Bank of Iran will be able to sustain the upward momentum.
EDITORS' NOTE: Reuters and other foreign media are subject to Iranian restrictions on leaving the office to report, film or take pictures in Tehran.

A customer buys Iranian gold coins at a currency exchange office in Tehran's business district October 24, 2011. Iranian media reported last week that monetary authorities had reversed a six-month-old decision to cut interest on bank deposits, aiming to mop up excess cash in the economy and halt a dangerous rise of inflation. The news made sense to economist

After months of a drastic and ongoing depreciation, the Iranian rial started recouping losses last week, mostly on the back of government intervention. The Central Bank of Iran (CBI) has since been largely successful in maintaining the value of the national currency, which has taken a beating due to structural problems in the economy and psychological factors relating to the US withdrawal from the Joint Comprehensive Plan of Action (JCPOA). But the question now on the minds of Iranian observers and investors alike is how sustainable the monetary regulator's policies will be, especially considering its track record of fanning the currency crisis with poor decision making.

The rial, which has lost approximately 75% of its value this year, hit a record low rate of 190,000 against the US dollar on Sept. 26, shortly after the showdown between Presidents Hassan Rouhani and Donald Trump at the United Nations. Three days later, a top state body comprised of the heads of the executive, legislative and judicial branches gave the CBI the green light to intervene in the foreign exchange market. Of note, only weeks before, recently appointed central bank chief Abdolnaser Hemmati had promised to stay away from such interventions.

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