DUBAI - The Iranian rial recouped some of its recent losses on Saturday, gaining more than 6% amid prospects of diminished regional tensions after Iran and regional rival Saudi Arabia agreed to resume diplomatic ties.

Iran and Saudi Arabia agreed on Friday to re-establish relations after years of hostility that had threatened stability and security in the Gulf and helped fuel conflicts in the Middle East from Yemen to Syria.

On Saturday, the rial was trading at 447,000 against the U.S. dollar on the unofficial free market, compared with 477,000 on Friday, according to foreign exchange site Bonbast.com. The website bazar360.com gave the rate as 446,500.

The rial, which had fallen to an historic low of 601,500 per dollar in late February, has rebounded in March as tensions over Iran's nuclear programme appeared to ease with a visit to Tehran by the head of the United Nations nuclear watchdog IAEA.

Talks between Iran and world powers to curb Tehran's nuclear programme in exchange for the lifting of sanctions have been stalled since September, worsening Iran's economic prospects.

With annual inflation running at more than 50%, Iranians have been trying to protect the value of their savings by buying foreign currency or gold.

The rial has lost nearly 30% of its value since nationwide protests began in September following the death in police custody of a young Kurdish Iranian woman.

The unrest has posed one of the biggest challenges to theocratic rule in Iran since the 1979 Islamic revolution.

Foreign exchange traders say the rial's depreciation stems partly from the unrest, as well as Iran's increased isolation in the face of Western sanctions over its human rights record and Russia's use of Iranian-made drones in Ukraine.

The reimposition of U.S. sanctions in 2018 by then President Donald Trump has harmed Iran's economy by limiting Tehran's oil exports and access to foreign currency.

Tensions with the United States persist and Washington on March 8 imposed sanctions on Iranian officials and companies over accusations of serious human rights abuses.

(Reporting by Dubai newsroom; Editing by David Holmes)