Thread: Bull run on Iraqi dinar too good to be true ~Reuters~

Bull run on Iraqi dinar too good to be true | Reuters




Bull run on Iraqi dinar too good to be true

Thu Dec 13, 2007 9:21am EST
By Mussab Al-Khairalla

BAGHDAD (Reuters) - A bubble in the Iraqi currency popped on Thursday after the central bank denied rumors of a revaluation, causing confusion on streets where the main risk of trading is usually violent death, not currency fluctuations. A normally stable currency backed by billions of dollars in oil revenue, the Iraqi dinar had risen by 10 percent practically overnight. But a sudden bull run on the dinar proved too good to be true.

Street traders who had raised the price of Iraq's currency over the past few days abruptly lowered it again after the central bank denied it was trying to haul the currency up to sudden parity with the U.S. dollar. The Iraqi dinar had been gaining value slowly for months after the government announced a plan to gradually raise the exchange rate, now officially 1,210 to the U.S. dollar.
But the past week had seen the rate on Iraq's streets climb suddenly as high as 1,080 as rumors spread through Baghdad that the government was planning to move the official rate suddenly to 1,000 and remove three zeros, making a dinar worth $1. Not so, the central bank said, blaming speculators. (Ummm, correct me if I'm wrong but this didn't come from speculators, it came from the Finance Minister Jabon on the 29th of Nov.)

"An authorized source at the Central Bank of Iraq denies rumors that claimed the bank wished to value the dollar at 1,000 dinars, or less or more, or change the currency denominations, or remove the zeros from the present currency," the central bank said in a statement. "The Central Bank is following the phenomenon of less demand for the dollar closely," it said. "Information or widespread rumors like this are designed to allow very quick trading benefits for some at the expense of the people."

SELLING DOLLARS

At Abu Mohammed's storefront currency exchange shop in Baghdad's central Karrada district, the price of a dollar was back up to 1,180 dinars on Thursday, close to the official rate, after falling as low as 1,080 on Wednesday. Abu Mohammed earned a profit on Wednesday from customers who rushed to get rid of dollars as they lost their value. "I feel sorry for those who traded yesterday, but what can I do?" he said. The currency moves caused confusion in shops. Most Iraqis receive salaries in dinars but stores list prices for expensive imported items in dollars.

Refrigerator shop owner Abu Ibrahim hadn't yet heard that the dollar was recovering and thought he was now stuck with fridges priced in a U.S. currency worth far less than when he bought them. "The central bank has to change the rate slowly if it wants to succeed. If someone has a contract a year ago in dollars and everything become more expensive for him, then he won't be able to gain any profits."

Iraq's currency stability is a point of pride, both for the government and its U.S. backers. Thanks to rising oil prices and increasing exports, Iraq's public finances are in surprisingly good shape for a country that has seen nearly five years of war follow 12 years of U.N. sanctions. Iraq exports nearly 2 million barrels of oil per day and next year's budget is expected to be $48 billion.

(Writing by Peter Graff; Editing by Caroline Drees)
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You know, this almost reads like a retraction to Jabor's statements from the 29th. I'm even more convinced now that he was talking about the value and not a lop.

Let's review what's been said by the CBI:

Central: devaluation of the dollar falls within the government's plan to support the dinar
بغداد/نينا BAGHDAD / Nina

A source at the Central Bank of Iraq that the apparent decrease in the market value of the dollar against the Iraqi dinar is the practical implementation of the government's plan aimed to raise the value of the local currency within the bank monetary policy. .

He added Almsdrams Wednesday: We have confirmed that the bank continues to progressive implementation of the plan aimed at raising the central value of the dinar against the dollar de****e the fact that it undermines the financial returns expected after conversion into local currency. . He added: Aatouka to be a significant shortfall in funds citizens dealers dollar because of lower interest rates and falling profits resulting from the many projects.

Navia: faith Bank basket of currencies dealing with the disengagement dollar at the present time. الخدمات. He pointed to the source: The question of lowering the prices of consumer goods and transport fares will be with the passage of time as economic prospects will not affect this reduction on the level of service delivery.

The source continued: increased spending contributed to the low dollar, which would not affect the purchasing power of the citizen or the overall economy because the Iraqi government, since printing the new currency dinar is Macdt deal by the Ministry of Finance and directed by government department

http://64.233.179.104/translate_c?hl...p%3Fid%3D12854

The Republic of Iraq
The Seccretariat of the Council of Ministers-the National Center for Information Media Relations Press Release Press Statement Monday 10-12-2007

(100, 50, 25) The National Center for Media: Central Bank of Iraq decides to withdraw coinage of the categories (100, 50, 25) dinars

The Iraqi Central Bank decided to withdraw the categories (100, 50, 25) dinars now in circulation in the market.[/color]

The Bank announced in a statement that he will be replaced Akiem mineral equivalent paper to the banks and branches scattered in Iraq without charge or commission.

CBE confirmed that the duration of the replacement beginning on the date of 3/1/2008 until 31/1/ 2008, contending that the currency mineral null will be deliberate or acceptance of the Republic of Iraq after the expiration of the term replacement.

Translated version of http://nahrain.com/d/news/07/12/10/nhr1210g.html

And here is Zubadi's statement from the 29th:

Zubaidi: Iraqi's commitment to provide Jordan with oil at preferential prices

http://translate.google.com/translat...&hl=en&ie=UTF8

Amman-Constitution-Ahmad Fayyad Nader met with the Prime Minister in his office headed by Golden Minister, yesterday, Iraqi Finance Minister, Baqir Jabr Zubaidi and discussed with him bilateral mechanisms to enhance cooperation between the two fraternal countries in various fields, especially economic them.

The premier said that the Jordanian firm position in support of brotherly Iraq, pointing to the guidance Royal Commissioner to provide all possible means, to alleviate the suffering faced by the Iraqi people.
He expressed his government's interest in promoting the Golden investments and commercial traffic between the two sister countries, stressing the government's keenness to provide all facilities and investment incentives that would contribute to enhancing economic opportunities and serve the interests of the two fraternal peoples and increase competitive private sector in the two countries.

The Premier pointed out the importance of taking the necessary actions and measures to stimulate traffic between the port of Aqaba and the Iraqi port of Umm Qasr and especially since the port of Aqaba has many competitive advantages Tohlh to serve the commercial and industrial sector of Iraq.

Also during the meeting, which was attended by Finance Minister Dr. Hamad Alexasabh discuss and review issues related to file financial relations between the two countries are to be studied by the committee of financial and banking comp****t in the two countries, especially file financial dues of the Central Bank of Jordan to the Central Bank of Iraq.
On the other hand, and the Iraqi Ziralamalih Baqir Jabr Zubaidi determination of the Iraqi government to strengthen the ties of bilateral economic and commercial relations with Jordan and the removal of all impediments to the development and upgrading.

Zubaidi said in a meeting with the Ministers of Finance Dr. Hamad Alexasabh, Industry and Trade Ameralhdede the presence of representatives from economic sectors in Jordan Chamber of Commerce, that the Iraqi government will work to establish a joint Jordanian-Iraqi bank to facilitate financial transactions and trade exchanges, he said, adding that the Jordanian and Iraqi sides agreed to discuss and resolve the debt problem of the sector Special conventions outside the Jordanian Trade Protocol earlier, which would be on top of the agenda of the economic talks held by Jordanian and Iraqi sides after Eid Al-Fitr, as the two sides will discuss concluding an agreement on free trade between the two countries.

He said the Iraqi government was committed to provide oil to Jordan at preferential rates of less than 18 to 22 dollars a barrel on world prices, as the problem is not the flow of oil to Jordan, formerly of the dividend comes and security conditions for the shipment of oil through confirming the demise of all impediments that prevented supply Jordan with oil Iraqi, pointing out that he discussed with Prime Minister Eng rare golden importance of establishing pipeline project to transport oil from the Iraqi city of modern access to the port of Aqaba, which it described as the breath of lung Iraq, was also discussed with the Syrian side reform of the next Iraqi oil pipeline from Kirkuk through territory Republic.

He called Zubaidi businessmen, investors, traders, industrialists and entrepreneurs Jordanians to seize the opportunities offered by the Iraqi market, where the Iraqi government will deal with the Jordanian private sector on an equal footing with figures and economic sectors Iraqi and other nationals, without bias in projects and tenders of Iraq, calling on Jordanian contractors to progress towards infrastructure projects and reconstruction in Iraq needs to be 1.5 million housing units currently number will double in the coming years, pointing to the existence of Jordanian contractors in Iraq awarded tenders to construction in Basra and other Iraqi cities.

Reviewed Zubaidi reality the Iraqi economy and said: that the Iraqi government was able to extinguish the 90 billion dollars of Iraqi debt stock of $ 140 billion dollars, and has worked to reduce the size of inflation from 66 per cent to Between 16 - 18 per cent, and that the Central Bank of Iraq 22 billion dollars , 3 tons of gold specifically to support the Iraqi dinar, rising value of the Iraqi dinar against the dollar from 3 thousand dinars in 2004 to between 1200 1000, the dinar this year, stressing that every effort will focus on Iraqi deleted 3 zeroes of the value of the Iraqi dinar, leading to ID one for every dollar ...[/color]

He noted in this context that the budget Iraqi in 2008, which will be in ages will be 53.5 billion dollars, including 15.5 billion dollars for reconstruction and development governorates, 23, billion dollar investment expenditure.

For his part, Minister of Industry and Trade Amer railway that Jordan would work to strengthen and develop economic relations and trade between the two sides and the removal of all obstacles aimed at facilitating cruise goods and trade exchanges between the two sides, the Jordanian government confirmed its commitment to present all it can in the reconstruction of Iraq, and providing expertise to the Iraqi side in the areas of membership of the World Trade Organization.

Ferro said that the Prime Minister Nadir Al Golden has stressed the need for all concerned to facilitate the establishment of Iraqi businessmen and action to solve the problems and obstacles facing them. The railway said in press statements that the development of the industrial sector and raise competitive and to attract more investments will be on the top priorities of the next stage.

Deal or buy,
thanks for posting, yes strange things are happening now and I feel the next few weeks are going to be very interesting to say the least.

Thank you,

Ian.

It seems the people of Iraq must now know that something is in the wind concerning their currency. Strong hints from the GOI to hold on to some of them thar dinars. Lots of talk about ME oil producers revaling their currencies. Stand by to Stand by!!

And here is Bayan's statement from the 29th off of Dow Jones. It hardly seems like speculators started this rumor.

UPDATE: Iraq Plans To Rebase Its Dinar Early 2008 - Fin Min

UPDATE: Iraq Plans To Rebase Its Dinar Early 2008 - Fin Min

Thu, Nov 29 2007, 15:19 GMT
Dow Jones Newswires: Global Financial news and commentary
UPDATE: Iraq Plans To Rebase Its Dinar Early 2008 - Fin Min

(adds more interview details)

By Hassan Hafidh

Of DOW JONES NEWSWIRES

AMMAN (Dow Jones)-The Central Bank of Iraq is contemplating rebasing the Iraqi dinar and issuing new banknotes early next year, the country's Finance Minister said Thursday.

"The Central Bank will take a decision in three months time from now, taking off three zeros from the current Iraqi dinar value," Bayan Jabor said in an exclusive interview with Dow Jones Newswires in Amman.

On Thursday, the dinar traded 1,230 dinars against the dollar, according to a trader in Baghdad. If the rebase decision is taken, it means that a dollar will equal only 1.23 dinars at current prices, the minister said.

Currency rebasings usually are monetarily neutral and are introduced to make commercial calculations easier. Turkey knocked six zeroes off its lira currency on Jan 1 2005, for example.

Before the U.S.-led invasion of 2003, the dinar was trading at 2,500 against the dollar. During early 1980s an Iraqi dinar was traded by Iraqi state-run banks at 3 dollars.

The Central Bank of Iraq has been working to improve the value of the dinar against the dollar through holding a daily auction to sell dollars to private and government banks. The bank sells between $35 and $50 million in each auction it holds, bank officials said.

The Iraqi minister said, however, printing new bank notes and fully replacing old notes would take two years.

In July 2004, the now dissolved U.S. civilian authority in Iraq decided to print the current Iraqi bank notes replacing those used to bear the picture of the former Iraqi leader Saddam Hussein. Iraqis then had three months to swap their old dinars with the new ones.

According to Central Bank officials some 10,000 tons of old dinars were then collected and burned.

The current banknotes were printed by Britain's De La Rue Plc (DLAR.L), the world's biggest commercial printer of bank notes. Jabor didn't say which company would print the new banknotes.

Jabor said that the government was able to bring down inflation from a record figure of 60% last year to a current 16%. He said Iraq's economy is growing at a rate of 6% this year and that the government wants to increase that figure with more crude oil exports, tourism and agriculture in 2008. Iraq sits on the third largest oil reserves in the world and depends on oil sales for almost all of its foreign currency earnings. Jabor announced earlier this month that the country's budget for 2008 would be $48.4 billion up from $42 billion in 2007. Some 88% percent of that budget would be financed from oil revenues which are expected to reach $36 billion, according to Iraqi officials.

He said that his ministry has allocated $15.5 billion for investment in various industrial, oil, agricultural, housing and service projects in 2008. He said some $5 billion that the government was not able to spend in 2007 would be moved to 2008 investment plan.

While in Amman, Jabor met with Jordanian businessmen to encourage them to start investment in Iraq's ambitious reconstruction plan for 2008. He did the same thing with Syrian and Kuwaiti businessmen last week. - By Hassan Hafidh; Dow Jones Newswires; + 962 777 612 111; [email protected]

(END) Dow Jones Newswires

November 29, 2007 10:19 ET (15:19 GMT)


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