Iran's rial rebounded against the dollar yesterday as banks in the Islamic republic offloaded the greenback to curb the local currency's recent steep losses triggered by sanctions, dealers said.

The dollar was trading at around 10,750-10,800 rials compared with 12,500 on Wednesday when banks restricted the sale of foreign currencies to private individuals, according to a report in our sister newspaper Gulf Daily News.

Long queues were seen yesterday outside several banks and official foreign exchange houses as dollars became freely available again.

Before banks began restricting greenback sales without any explanation last week, the rial had been trading at 10,500 to the dollar.

Economists had said the greenback's scarcity was an indication the latest international sanctions against Iran for refusing to stop its controversial uranium enrichment work were beginning to hit the country.

They pointed in particular to the fact that Dubai, Tehran's main trading partner, had stopped money transfers there since August after similar decisions by the US and European Union.

A dealer said this week's large sell-off of the dollar was in fact an attempt to counteract the effect of sanctions.

'We do not have access to the outside world as we have difficulty in transferring money outside because of sanctions. This (selling of US dollar) is the (government's) way of battling the sanctions,' he said.

Iranian President Mahmoud Ahmadinejad said the volatility in the foreign exchange market was an attempt to hit the Islamic republic's foreign trade activity.

'Some people tried to disrupt the exchange market through a propaganda campaign, so that the import and export sectors are hit,' he said in a speech in the northern Golestan province, adding the move would fail as 'Iran's foreign exchange reserves were spectacular.'

Another dealer predicted the price of the greenback would continue to fall. 'With measures taken by the government, the rate of dollar will drop every day,' he said.

The recovery in the rial follows a statement last Thursday by central bank governor Mahmoud Bahmani that Iran intends to bring dollar rate down to 10,600 rials by around October 8.

Bahmani added that Iran has 'increased its reserves' and would continue selling gold coins and foreign currency to professionals.

The central bank over the past few years has consistently ensured the Iranian rial remains bullish against foreign currencies.

However, a woman traveller said that 'black marketeers were making a killing' in the current volatile foreign exchange trade.