Shabibi Speaks About Decline of Dinar Against Dollar

[Rayzur]

Iraqi dinar bears brunt of Iran, Syria sanctions

Demand for dollars of Iraq’s sanctions-hit neighbours Iran, Syria force Iraqi dinar to lose ground to greenback.

Middle East Online

By Mohamad Ali Harissi - BAGHDAD

Casualty of sanctions against Iran and Syria

Iraq has seen its currency fall against the dollar despite taking in billions per month in oil revenues, at least in part due to the demand for dollars of its sanctions-hit neighbours Iran and Syria.

After being stable at around 1,160 per US dollar for years, the Iraqi dinar was exchanging hands at a rate of 1,230 last week and 1,320 on Tuesday, before settling at 1,270 against the greenback on Wednesday.

Syria has been sanctioned over its deadly 13-month crackdown on dissent, while Iran has been hit with punitive measures over its suspect nuclear programme, leaving both countries in need of foreign currency, especially dollars.

From the beginning of 2012, "there was a currency attack," with an increase of between 40 and 50 percent in demand for dollars, Iraqi central bank governor Sinan al-Shabibi said.

"The somewhat unstable political situation in Iraq and in the surrounding region led to a large demand for dollars, which is causing a higher exchange rate lately," Shabibi said.

Within Iraq, there have been disputes between political blocs and also between the central government and the country's autonomous Kurdistan region.

Asked whether sanctions against Syria and Iran were one of the main causes of the increase in demand for dollars, Shabibi said: "This is one of the reasons, but the region surrounding us in general is not stable."

Shabibi said that "financing neighbouring countries with dollars is not something we do on purpose, because Iraq depends on large amounts of imports," for which the central bank's sales of dollars are needed.

However, he noted the demand for dollars seems to exceed what is necessary for imports.

"Iraq is the only country among its closest neighbours (Syria and Iran) which has huge revenues in dollars from oil," Iraqi economist Hilal Tahan said.

Baghdad takes in upwards of $7 billion in oil revenues per month.

"The increase of financial transfers of dollars to outside Iraq and the unstable political situation (in Iraq) are increasing the demand for foreign currency and the exchange rate for dollars," Tahan said.

"Dollars have lately been smuggled outside Iraq, and that is why the auctions (by the Iraqi central bank) should stop for a certain period," he said.

Deputy central bank governor Mudher Mohammed Saleh said on February 4 that the bank had enacted measures to identify those who buy dollars at its auctions amid concern that some traders were buying on behalf of others.

Asked if Iranian and Syrian traders were trying to buy dollars, Saleh said at the time that "this increase in demand for dollars, while the region has serious problems, led us to put the new procedures in place."

Mohammed al-Omari, 40, who owns a money exchange shop in Karrada in central Baghdad, said that "the price of the dollar... was stable from 2008 until the start of this year," when it became increasingly volatile "because of the central bank's procedures."

"The street needs dollars, and when the auction is not pumping out dollars, it is forcing us to go to the black market, which leads to an instability in the prices, and losses" for Iraqi businesses, he said.

Hadi Alwan said his Karrada exchange bureau had stopped dealing in dollars this week.

"I used to exchange between 50,000 and 150,000 dollars per day, but I stopped doing that since the prices became volatile and I began to lose money," the 37-year-old said.

Despite the volatility, the central bank chief sought to play down concerns about the foreign exchange market.

"Iraq is not currently considering stopping the (dollar) auctions, which are part of a financial policy," Shabibi said, adding that "everything is under control."

In a large electronics store in central Baghdad, however, sales manager Bassem al-Shammari said he was worried the shifting exchange rate is hurting sales.

"Iraqi society is afraid to buy things when the exchange rates are... not stable," Shammari said. "The process of decreases and increases is killing the market."

"The instability started a week ago, and this matter did not affect the price of the goods, because we buy in dollars, and we sell in dollars."

But the quantity of goods sold has been affected, the 40-year-old said, noting that "our sales have decreased by 50 percent."

Middle-East-Online.com 2012-04-12

[Tirebiter]

Thanks for the post Rayzur!

[zantac]

Asked whether sanctions against Syria and Iran were one of the main causes of the increase in demand for dollars, Shabibi said: "This is one of the reasons, but the region surrounding us in general is not stable."

Shabibi said that "financing neighbouring countries with dollars is not something we do on purpose, because Iraq depends on large amounts of imports," for which the central bank's sales of dollars are needed.

At last straight from the horse’s mouth.

THIS IS WHY THE AUCTIONS OF THE CBI WILL HAVE TO STOP BEFORE ANY RV/RI WILL BE SEEN.

REST MY CASE

Edited April 15, 2012 by zantac

[aaanth]

"Iraq is not currently considering stopping the (dollar) auctions, which are part of a financial policy," Shabibi said, adding that "everything is under control."

Read more:

doesn't look like that is going to happen..

[JERRY A]

so basically no RV anytime soon?

[R Veyron]

My questions are ,, are things going to get better and or fix themselves if they continue to utilize the dollar ? Can and will things stabilize given the variables that continue to contribute to the decline in the value of the dinar ? Continued usage and utilization of the dollar will only prolong the issues that plague them and their economy. Shabibbi seems to be stating the obvious and I believe he knows what needs to come next.

[myst]

Thank you for your post Rayzur.

Sure sounds to me like they need to RV badly at 1 iqd = 1 usd

,at the very least.

myst

[C.H.]

Quite simple here you can forget about all the news stories and hot air, let the market decide the market is always right, the price is always right, market numbers do not lie. This is simply a supply and demand issue if there is demand for the Dinar the rate will rise if there is no demand the rate will fall. We as investors of the dinar are small fish in a huge pond compared to the huge financial institutions who are either buyers or sellers. Again quite simple if there are more buyers (demand) the rate will rise if there are more sellers (too much supply) the rate will fall. Our decsion as small investors is again a quite simple one, is the Dinar going to be worth more or less in the future than it is today. An investment decision such as this should not be based on hope and fear, Simply buy and hope the rate will rise or buy only to fear the rate will never rise. The proper decision to make on whether to invest or not invest should be made upon doing research and educating one's self on the facts of Iraq's current and future economy.

[mrref]

Quite simple here you can forget about all the news stories and hot air, let the market decide the market is always right, the price is always right, market numbers do not lie. This is simply a supply and demand issue if there is demand for the Dinar the rate will rise if there is no demand the rate will fall. We as investors of the dinar are small fish in a huge pond compared to the huge financial institutions who are either buyers or sellers. Again quite simple if there are more buyers (demand) the rate will rise if there are more sellers (too much supply) the rate will fall. Our decsion as small investors is again a quite simple one, is the Dinar going to be worth more or less in the future than it is today. An investment decision such as this should not be based on hope and fear, Simply buy and hope the rate will rise or buy only to fear the rate will never rise. The proper decision to make on whether to invest or not invest should be made upon doing research and educating one's self on the facts of Iraq's current and future economy.

WOW did you figure this out all by yourself???, Brilliant.

[Rayzur]

Thank you for your post Rayzur.

Sure sounds to me like they need to RV badly at 1 iqd = 1 usd

,at the very least.

myst

Hey Girl ! There's the Pink Piggy T-shirt! Fabulous!...What did you have to do to win that!!!!! Nice!!!!!

PS, Now that I'm not on my MAC I can post a better link :

http://middle-east-online.com/english/?id=51686

[myst]

Hey Girl ! There's the Pink Piggy T-shirt! Fabulous!...What did you have to do to win that!!!!! Nice!!!!!

Hey there Rayzur,Did not win the shirt.......ordered it through Csole's magazine

of Pink piggy stuff....

You will find him ,inside the 1000 plus pages topic....... in the forums.

If you have not met the Pink Piggy......you are missing quite a treat

myst

[Rayzur]

Okay, will check out Pink Piggy......

Meantime, I think this article explains whats going on right now better than most I've read in the past few days... At least its the most clearly stated in terms of the cycle we are in regarding the dinar, and gives me more hope in summation than many of the other bits an pieces strung together...

And still we wait....