Traders said it cost as much as 650 Syrian pounds to buy one dollar on the street on Tuesday. The pound closed slightly higher at 652 on Wednesday after a progressive decline since the end of November that has accelerated in the last month.

The pound had traded at 47 to the dollar before protests against President Bashar al-Assad erupted in March 2011.

International sanctions against the Syrian government, damage to the country's industry from the fighting, and panicked Syrians' sending their money abroad pushed the currency down sharply during the conflict.

Dealers said although the pound briefly hit a 660 to the dollar benchmark in 2016, this was the first time it has hovered around near these record low levels for days.

"There is strong demand on the dollar for a host of factors and reasons and not because there are no dollars, or else it would have shot up much higher, but demand is more than supply and so the dollar has gone up," Khalil Touma, a leading businessman, told Reuters from Damascus.

The pound had enjoyed almost two years of relative stability after Moscow alongside Iranian-backed militias turned the tide in favour of Assad by pushing rebels from large swathes of territory in western and eastern Syria.

The expanded US and European sanctions since November that hit Syrian businessmen close to Assad and targeted non-Americans trading with Syria have deterred international companies from investing in post-war reconstruction, as long as Assad clings to power.

Local investors say the currency was also hurt by dashed hopes that Assad's battleground gains would encourage wealthy Syrians abroad to seek opportunities in the war-ravaged economy, many of whom were also scared by tougher sanctions.

Also putting pressure on the currency, the Syrian central bank has largely abandoned efforts in recent months to support the value of the currency in order to protect its remaining foreign exchange reserves, local businessmen say.

"The central bank is taking no action, that which made people panic, thinking it is helpless and can do nothing to stop the weakness," said a Damascus-based banker who requested anonymity.

Bankers and currency traders contacted in Damascus said the central bank has long turned a blind eye to official exchange dealers selling at market prices that were much higher than the daily benchmark set by the central bank. It stood on Wednesday at 438 pounds per dollar.

The central bank still provides dollars for the import of 40 essential goods at a preferential rate much lower than the market rate, but otherwise it is largely letting market forces operate, the banker said.

Despite widespread devastation caused by the conflict and Western sanctions, the currency has so far avoided a complete free fall, bankers say, citing remittances from Syrian expatriates to relatives and infusions of aid from the country's main regional ally Iran.

Iran is believed to have deposited in recent years hundreds of millions of dollars into the country's now depleted reserves that stood at $17 billion before the civil war, according to bankers familiar with the Syrian banking sector.

The crumbling of the currency has driven up inflation and aggravated hardship as many ordinary Syrians struggle to afford basics such as food and power.

Many Syrians now hoard the dollar as a hedge in a battered economy that was increasingly dollarised.

Copyright Reuters, 2019