Tuesday, September 9, 2008

Iraqi dinar soars despite rising dollar

Azzaman, September 8, 2008

When the new Iraqi currency went into circulation about four years ago, one dollar bought nearly 1,500 dinars.

But the dinar surged in value, backed by a hike in Central Bank’s reserves of hard cash and financial policies that have prevented the currency from sliding.

Iraq exports nothing of note apart from oil. Unlike industrial countries where expensive currency negatively affects exports, Iraq has no such worries.

Oil prices have nothing to do with the value of national currencies of oil producing states.

Thus the Central Bank’s policy of keeping the dinar appreciating is one of the rare success stories in an economy battered by U.N. trade sanctions and ongoing war since the U.S. invasion of 2003.

When the dollar climbed to a one-year peak versus a basket of major currencies on Monday, it kept sliding vis-à-vis the Iraqi dinar.

The dinar soared to 1l82 to the dollar from 1184.

The Central Bank keeps a close eye on the Iraqi financial market and specifically the exchange rate. Every week the bank sells on the spot Baghdad market up to 1 billion dollars. On Monday it sold $113 million.

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