AMMAN In Syria's eastern town of Deir al-Zor, a rebel commander flush with cash was swapping his dollars for Syrian pounds to pay fighters battling President Bashar al-Assad's forces.
Money changers said that influx of foreign currency earlier this month helped push the pound's black market rate in the impoverished town up by at least 10 percent.
Hundreds of kilometres away in Damascus, panicked Syrians bracing for more violence sold pounds for dollars, driving the pound, which has lost half its value since the anti-Assad uprising erupted in March last year, the other way.
The events at opposite ends of the country illustrate the contrasting pressures on a currency whose sharp decline has been cushioned by factors including central bank intervention, flows of cash from Assad's friends and foes abroad, and even long term hopes for a wave of foreign investment if Assad were to fall.
By comparison, Iran, Assad's staunchest regional ally, has seen its own currency fall more sharply than Syria's, losing about two-thirds of its value since June 2011 because of Western sanctions imposed over Tehran's disputed nuclear programme.
Damascus-based currency dealer Abdullah Abu Saloum, who also has an office in Deir al-Zor, said the rebel fighter's cash was one of many anomalies affecting Syria's foreign exchange market.
"There was a large quantity of dollars that were offered for sale at an attractive price," he said, adding ruefully that he was not able to capitalise on the opportunity because the ongoing violence, which has killed more than 40,000 people, prevented him transferring pounds from Damascus to Deir al-Zor.
"When problems grow, people decide to buy dollars, not sell dollars, but this is what Syria's conflict is producing -- all types of distortions and contradictions."
The pound is trading at 94 to the dollar on the black market compared to 48 before the uprising - a steep fall but less calamitous than might be expected given the devastating loss of state revenues and long term damage wrought by the conflict.
It hit a record low of 105 to the dollar earlier this year before recovering slightly, even allowing the central bank to recoup some losses from its heavy intervention by buying back dollars as they eased slightly, bankers say.
A banker in a Damascus-based subsidiary of a regional bank said cash flows to the Deir al-Zor rebel commander and his comrades were partly responsible for the pound's resilience.
"All the money sent to the opposition comes in foreign currency and this is supplying the market with dollars and keeping the pound afloat," he said.
Assad's foreign backers have also helped.
"The only logical explanation why the regime is able to defend the pound ... is the aid it is primarily getting from Iran," said Samir Seifan, a prominent Syrian economist living abroad, adding that Russia and Iraq were also providing support.
Iraq's Shi'ite government has "opened its trade, helping the country get foreign currency", he said. Baghdad has given preferential access to Syrian exports since the crisis, making it Syria's main trading partner as Gulf and Turkish flows dry up.
CENTRAL BANK MOVES
At one stage last year, Syria's central bank supplied dollars relatively freely to stabilise the exchange rate; bankers estimated it spent an average $500 million every month.
It also sought to manage a multi-tier exchange regime as part of its efforts to stem the decline - including one for importers buying raw materials and another set daily by the Central Bank to cover other financial transactions.
But the intervention came at a price. Syrian officials say Central Bank reserves stood at around $18 billion before the crisis, and regional bankers say those reserves have diminished by at least a half to around $8 billion.
As the crisis deepens, authorities' ability to maintain the pound's relative stability is being strained, with signs that the central bank is less able to intervene effectively, several exchange dealers contacted by telephone from Damascus said.
"The Central Bank is no longer pumping dollars. The supply is low and the demand is high from the black market, so the dollar has gone up," Wael Halawani, a money changer in the main Seven Lakes business area in central Damascus said.
In the last month alone, as the conflict reached the edge of Assad's power base in Damascus, the pound shed 15 percent. Bankers said the absence of central bank response was notable.
To conserve scarce foreign reserves, the monetary authorities have also stopped selling up to $5,000 to Syrians at preferential rates for personal use, undermining a key hallmark of the multi-tier exchange rate regime.
They had already halved the entitlement from $10,000, and also priced the exchange rate for personal use closer to the black market rate, said one exchange dealer.
Even importers, who are supposed to have priority access to foreign currency at around 77 pounds to the dollar, said they were finding it hard to get hold of dollars.
Last month the Central Bank sought to give the state-run Commercial Bank of Syria exclusive rights on foreign exchange after complaints that currency dealers were exploiting the discounted import rate to sell on to the black market.
"They would take dollars and not channel them to real importers. We would go to a leading exchange dealer who would say 'Dollars in such quantities are not available', and in fact they would have taken $3 million and hoarded it," said a prominent importer of foodstuffs.
But bankers say the move to curb currency dealerships just put more pressure on the pound at a time when central bank intervention had fallen sharply from around $15 million a day.
"For almost a month they have been injecting no more than $1 million a day and this is not helping the pound," said a banker.
The cumulative impact of reduced intervention and a move away from the multi-tier exchange rage could bring Syria closer to allowing its official rate to fall to the prevailing market rates and may amount to a recognition that reserves could no longer be run down rapidly to defend the currency, bankers said.
But rebel funds are taking over in large parts of Syria.
"As long as there are large infusions of dollars coming to the rebels there will not be a total collapse of the Syrian currency and only if it dries up then we will see a free fall of the currency and we will see increasing dollarisation of the economy," said Samir Aita, a prominent Syrian economist who before the uprising was involved in economic decision-making.
Some businessmen see a gleam of hope if the conflict can be brought to a close, either by a political deal or a military victory by the rebels who are backed by wealthy Gulf Arab states.
Many expatriate Syrian businessmen who transferred their wealth abroad during 40 years of rule by Assad and his father, late President Hafez al-Assad, would be likely to repatriate some of their savings.
Syria, often cut off from international finance over the last four decades, could also attract significant international inflows of money.
"The important thing is, what solution is on the horizon?" a Damascus investor said. "There will be reconstruction and if one of the solutions is that someone like Qatar says 'we will pick up the bill and inject investments' then the pound will rise."
"One of the extreme scenarios is that if Qatar wants to gain the good will of Syrians then you will see the dollar go down to 40 pounds," said the investor who gave his first name as Wasim and has wide investments in the hotel and banking sectors.
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