article questioning 2 exchange rates

[vomer]

http://www.iraq-businessnews.com/2014/04/02/why-two-exchange-rates/ maybe this means something I dunno.

Posted on 02 April 2014. Tags: CBI, Dinar Exchange Rate, IQD, ISX, Mark DeWeaver

By Mark DeWeaver.

Since the Central Bank of Iraq (CBI) began changing the rules for its USD auctions in 2012, Iraq has been operating a de facto dual exchange rate system. (There’s a summary of some of the CBI’s recent rule changes on pages 12-14 of this report from Sansar Capital.) For those with access to the CBI auction—mainly banks and (as of March, 2013) importers using letters of credit—the rate has been fixed at IQD 1,166: USD 1.00. For the rest of us, the dinar has ranged from 1,194 to 1,292, with two major episodes of depreciation in mid-2012 and mid-2013 (see chart).

The ostensible purpose for this arrangement is to limit illicit outflows of foreign exchange to Iran and Syria. In practice, it serves mainly as a subsidy to banks, large importers, and anyone in a position to generate phony trade documents. The losers include everyone from foreign investors in Iraqi stocks to the government itself, which gets the CBI rate on its oil-export revenues.

Iraq is unusual in this regard. Dual (or even multiple) exchange rates are usually only found in countries suffering from chronic trade deficits and foreign exchange shortages. Typically the objective is to make foreign exchange available for “essential” imports or to control inflation by lowering import prices. Examples include Hitler’s Germany, China in the 1980’s and early ‘90’s, Burma prior to 2012, and Venezuela today. (See this note from the Asian Development Bank for an excellent introduction to this topic.)

It’s hard to see why Iraq belongs on this list. The country has a trade surplus, inflation is low, and the central bank has ample foreign exchange reserves. Even USD outflows to Iran are presumably no longer a major issue.

One exchange rate should be enough.

[TQueezy]

Because a major revaluation of their currency is right around the corner.

[vomer]

Because a major revaluation of their currency is right around the corner.

I was hoping someone would say that.

[GasCan]

The program rate isn't 1166 to 1 anymore. 

[WheresmyRV?]

The program rate isn't 1166 to 1 anymore. 

What is the rate?

[rockfl9]

There are actually three rates now one for those who can participate in the auctions , one for those who can use the cash window and the street rate

[Lutie]

There are actually three rates now one for those who can participate in the auctions , one for those who can use the cash window and the street rate

Does anyone have a clue what those rates are or will be when the rv happens?

[GasCan]

a lot higher than that and well over .10

[SnowGlobe7]

Does anyone have a clue what those rates are or will be when the rv happens?

 

[The Machine]

a lot higher than that and well over .10

 

you do mean lower .....

 

lower rate = higher value

 

higher rate = lower value

[iamtheeggman]

a lot higher than that and well over .10

Tell us more I n what range

[calkid11]

Thank you

[sandfly]

I'LL STILL TAKE .10

[SocalDinar]

This article is talking about posted rate and market rate

56 pip difference but stable

Thanks Vomer I remember this article

[SocalDinar]

I'LL STILL TAKE .10

At some point we all reach a tipping point Sandfly

You are down to times 100.

I'm way past that and would be happy at x 2

10,000 % really makes no sense to me anymore, not that it ever really did.

It's easy to believe what we want to believe

[ronscarpa]

[imgesing]

Actually it makes no difference what we believe...

Yet, what seems the most likely given the changes and trade, GDP, the list goes on.

It "should be" at a good rate. They repeatedly stated they will be the strongest currency in the Middle East.

[uncirculd]

SnowGlobe....      l....I loved Arnold Horshack.....  I wonder how many have seen Welcome Back Kotter.....

[easy]

SnowGlobe....      l....I loved Arnold Horshack.....  I wonder how many have seen Welcome Back Kotter.....

me