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    The New York Times Company

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    The New York Times Company

    Post  Seck on Tue 26 Nov 2013, 19:46

    How Iraqi Dinar Gains Travel Advantage
    Published: May 22, 1991
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    To the Editor:

    In "Dollars Can Still Get You Scotch and Waterford Crystal in Baghdad" (Reporter's Notebook, May 12), the logic of overvaluation of the Iraqi dinar is reversed. "In the last few days," it says, "the Iraqi dinar suddenly shot through the ceiling, and the dollar collapsed, dropping in value to five dinars or under. But why?" The reason suggested is that "a stronger dinar makes foreign travel more expensive for those planning to go abroad when the travel ban is lifted May 15, by increasing the cost of acquiring dollars."

    On the contrary, a stronger Iraqi dinar relative to foreign currency will make travel abroad more attractive, as the same amount of dinars an Iraqi is planning to exchange will fetch a larger amount of foreign currency. Travel abroad and foreign goods will thus become cheaper when the dinar is overvalued.

    An explanation more likely than the one provided is that Iraq wants its dinar to be artificially stronger in relation to other currencies because it expects in the near future not to export much but to import large amounts of foreign goods. For an importing country, it pays to keep the national currency overvalued. However, this works only in the short run. As trade partners accumulate large amounts of dinars and try to sell them, the price will inevitably decline.
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    Bull run on Iraqi dinar too good to be true

    Post  Seck on Tue 26 Nov 2013, 19:53

    (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.

    "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.
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    Japan Investors Duped Into Buying Iraqi Dinar as U.S. Withdraws

    Post  Seck on Tue 26 Nov 2013, 20:00

    Japanese consumers are being warned about an investment scam promoting the purchase of the Iraqi dinar on predictions the currency will surge in value as U.S. combat troops withdraw from the country.

    A man in western Japan spent 2 million yen ($25,000) to buy 500,000 Iraqi dinar ($428) after a caller recommended buying the currency because it was expected to gain as much as 30-fold, the National Consumer Affairs Center said on its website. The man, whose attempts to get a refund were unsuccessful, was among more than 200 people who bought the currency, the posting said.

    “In most cases, the exchange rate is extremely bad,” Ryota Kato, a spokesman for the center, said yesterday by telephone. “And you wouldn’t be able to exchange the dinar back into yen because currently no Japanese bank will accept it.”

    The Central Bank of Iraq exchanges 1,170 dinar for 1 U.S. dollar, according to its website, a rate that has been in place since early 2009. An Iraq government spokesman said in April the country has no plans to stop linking its currency to the dollar.

    Kato said the center received 368 inquires about Iraqi dinar in the nine months ended September, compared with four for all of last year. Among the 202 people who said they purchased the currency, the average investment was 3.5 million yen.

    “One person spent 20 million yen buying dinar,” said Kato, adding that the elderly have been targeted. Consumers are also advised to take precautions if asked to buy the Sudanese pound, he said.

    “Our organization can’t judge whether these transactions are fraudulent, but you should be very careful when you deal with currencies that have low liquidity,” Kato said. “We’re still getting many inquiries.”
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    Iraqi dinar skyrockets after trade with US $ dollar halted

    Post  Seck on Tue 26 Nov 2013, 20:03

    Baghdad, Sept 28: The Iraqi dinar rose dramatically against the US dollar on Thursday as Iraqis rushed to unload greenbacks two days after the government said that it stopped using the dollar in its foreign trade dealings.
    The dinar, which traded at 1,930 dinars against the dollar on Wednesday climbed to about 1,500 on Thursday. Several legal money changers in Baghdad put up their shutters and sent customers away because of the volatility. But currency trading continued in the back streets with a few people asking for dollars and hundreds willing to sell. "People want to get rid of the greenbacks, so far master of Iraq's currency market, fearing the dollar will fall further," one trader said. Another expected the demand for the dollar to remain high as the government decision concerned Iraq's foreign trade deals and had nothing to do with local markets. "I think the dollar will recover to the dinar in the coming days when the government decision will be made clear to every one," he said. This is the first time that the dinar has seen such improvement since 1996 when Baghdad accepted an oil-for-food deal with the United Nations. The dinar soared at that time to 450 to the dollar.

    Prior to the deal, which allows Iraq to sell oil for food and medicine for its population, the dollar traded at about 3,000 dinars. The dinar has been battered by 10 years of UN sanctions imposed after Iraq's 1990 invasion of Kuwait. A statement after the September 14 cabinet meeting which originated the dropping of the dollar said the move was to confront the "daily American-Zionist aggression." The United States, along with Britain, is enforcing no-fly zones in northern and southern Iraq to protect a Kurdish enclave in the north and Shi'ite Muslims in the south from possible attacks by government forces.

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