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Can a country revalue currency?


HopeTas
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I have a question: My brother, a stock trader, says that no country can revalue its own currency. If they could, all countries would do that to have better buying power against other countries. The only way a currency goes up is based on stability and resources, and they move up slowly over time based on economic improvement in the area. A currency goes up based on how it is valued in relationship to other currencies. Can anyone refute this opinion with facts?

How I see it is that Iraq's currency right now is not able to be traded on the world markets so they can jump in at a price that someone sets such as Shabibi, CBI or the IMF. I suppose this can happen as they move out of Chapter 7 and become sovereign. We hear about Kuwait and Turkey revaluing currency, but was this again from not being sovereign to becoming sovereign? Thanks in advance for any factual responses.

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I have a question: My brother, a stock trader, says that no country can revalue its own currency. If they could, all countries would do that to have better buying power against other countries. The only way a currency goes up is based on stability and resources, and they move up slowly over time based on economic improvement in the area. A currency goes up based on how it is valued in relationship to other currencies. Can anyone refute this opinion with facts?

How I see it is that Iraq's currency right now is not able to be traded on the world markets so they can jump in at a price that someone sets such as Shabibi, CBI or the IMF. I suppose this can happen as they move out of Chapter 7 and become sovereign. We hear about Kuwait and Turkey revaluing currency, but was this again from not being sovereign to becoming sovereign? Thanks in advance for any factual responses.

I think you may both be right. Your brother is talking about currency being traded in the Forex Market I think. And like you say you are not.

Turkey Redenominated/Lopped :huh:

And Kuwait RIed. Reinstated a previous value.

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If they could, all countries would do that to have better buying power against other countries.

End Quote

Not necessarily... Some Countries want to keep their currency kind of low in order to favor their exports if their exports are their main asset they count on.... like China......The US asked China lots of times to raise the Yuan and China would always say "NO"....

I think they gave in to the pressure as of late and revalued a tad bit but I'm not sure....

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It is naive to say that countries cannot 're-value' their own currency. There are many countries, both large and small that do, or in the past have, adjusted the value of their own currencies unilaterally. and yes, one of the reasons for doing this is economic opportunism.

China's currency at present is a managed currency. It is one of the strong points-of -dissention between US and PRC, because it give PRC very significant advantages over the US in terms of trade and international competitiveness. New Zealand for years had a currency that was based on a 'managed-float' in relation to a notional 'basket' of currencies with whom NZ traded. NZD is now a fully traded international currency and is revalued by the market every day. Not necessarily a good thing IMHO, but that's the way it is!

The challenge before us here is not that Iraq cannot set its own currency value, but that, if it wishes to join the world as a truly international currency, it has to adjust the Dinar's value, up or down, to a point that is, realistically, within a bulls-roar of what the market is going to say it is worth when it becomes 'freely traded' on the international currency markets.

If the Dinar was floated at its current value it would shoot upwards [value-wise] like a rocket, because it is clearly under valued. but then market dynamics would inevitably lead to it's being overvalued, and then going through the wave action of settling down to some level of 'normalcy'. That instability would cost Iraq dearly, as I understand it, and so when they do eventually move towards that 'international float', the economists will be trying to pick a value that is very close to where the 'market' is going to say it should be!

Whether that is USD0.10, or USD3.00 is anybodies guess, and I have no competence to comment personally. However some years back a Harvard economist suggested a basis of '1/3 of a USD + 1/3 of a EURO plus 1% of a barrel of Oil'. On that basis we could be looking at something like: 0.33 + 0.69 + 0.80 = USD1.82. And that was BEFORE Iraq had a democratically elected government, and still had US soldiers actively maintaining what peace there was!

USD1.82? I for one could live with that! Go RV!!!!

Edited by GrahamB
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