Prague Twin

Tuesday, January 16, 2007

Iraqi Dinar


The Iraqi Dinar has strengthened significantly since the beginning of November last year. According to this chart, well over 10% from 1,470 to the dollar to today's rate of 1314.

The Central Bank of Iraq has tried to keep the price stable, and has been doing a pretty good job of it, especially considering the circumstances. There is a very good piece on the history of the Dinar auction here, and you can see the actual data from the daily auctions here. Why such a drastic increase lately? Mostly because of the recent widespread trend to deal in Dinars instead of dollars. It has been predicted that the Dinar will hit 1200 to the dollar by mid 2007.

This is an interesting trend, and something that really caught my eye. On the surface it is positive, although no one is really saying if this is good or bad. However it does indicate that the Dinar is becoming a currency that people are actually using, and that is a positive. Time will tell if this is just a short term move or if it is the beginning of something big. I'll be sure to post updates.

7 Comments:

  • According to this chart, well over 10% from 1,470 to the dollar to today's rate of 1314.

    OK...I'm going to admit that I know nothing...NOTHING...about currency fluctuations, but couldn't this be the dollar weakening against the Dinar? I mean...the dollar is going down against just about every other currency in the world.

    I say this with a fair amount of snark, but as you point out it's indicative of the people's choice to use the Dinar.

    By Blogger Kvatch, at 2:54 AM  

  • Gee, maybe while the news media focuses our attention on Baghdad and insinuates in fact that Baghdad IS Iraq, the rest of the country is actually flourishing? Could it be?

    By Anonymous Arch Stanton, at 5:04 AM  

  • Funny thing about currency fluctuations is that they have little to do with central banks or economic prosperity.
    Those bloody minded money markets thrive on gambling with currencies, and stability is not primary concern.
    Australia is facing rising inflationary pressures and the currency is going gang busters.

    By Blogger Cartledge, at 6:30 AM  

  • Kvatch,

    The thing is, the dollar is basically flat against the Euro over the same period and is stronger against the Yen.

    Having said that, while the dollar was getting spanked by the Euro since the introducition of the Dinar, the Dinar and the Dollar were on level ground.

    Arch,

    Adding to the point above, what it really means is that the Dinar now has a life of it's own, and as Cartledge points out, there is no one to one correlation between the strength of a currency and the economic strength of the country.

    If there was, and your assertion that Iraq was flourishing because the Dinar is strengthening, then the reverse must also be true: the United States economy is in the toilet since the Dollar has depreciated 30% since Bush took office.

    I'm sure you don't agree with that.

    Cartledge,

    Interest rate expectations. Indeed currency is speculative, but in this case it is more about a demand for the new currency as more and more people are using Dinars instead of Dollars. The bank only has so many of them, so they need to get printing if they don't want the Dinar to get too strong.

    The Czech currency has appreciated 100% against the dollar in the last 6 years, but that isn't as great as it sounds. Sure, Addidas are cheaper, but exports suffer.

    By Blogger Praguetwin, at 8:05 AM  

  • What do banks actually DO to keep a currency stable?

    By Anonymous romunov, at 11:08 AM  

  • Buy! Buy! Buy!

    Sell! Sell! Sell!

    They usually pick a range or lay down certain barriers, but they can only do so much. The BoJ had "drawn a line in the sand at 150 to the Euro. That worked for about a week.

    By Blogger Praguetwin, at 12:14 PM  

  • Iraqi Dinar is very real, but the pitch many Dinar dealers try to send your way is far from reality and designed to get you buy from them. Some of these dealers even go as far as to explain that they are trusted by the government and supply you with a document to reinforce this illusion.
    First, the US government requires a business (or anyone for that matter) to register with them when selling any kind of currency. Once you register, the US Government will send you a letter confirming your registration. IT DOES NOT mean that they trust or vouch for the company, only that they complied with the law.
    Read More:http://www.dinariraqi.net

    By Anonymous Iraqi Dinar, at 8:28 PM  

Post a Comment

<< Home