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Iraqi Dinar Under Attack


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Iraqi Dinar Under Attack

Posted on 12 January 2012.

The Iraqi Central Bank (ICB) said it’s under a “currency attack” as traders buy U.S. dollars in daily auctions and resell them on the black market in Syria and Iran, which face hard currency shortages due to sanctions, according to a report from Bloomberg.

Demand for the dollar at the central bank auctions has risen since November to about $200 – $300 million a day, compared with about $160 million per day over the prior 12 months, the deputy central bank governor, Mudher Salih, said in an interview.

He added, “now we are checking the applications to buy dollars from the auctions more closely. We are afraid that some of it may be related to money laundering. We are now under a currency attack because of the regional situation.”

U.S. Treasury Undersecretary David Cohen said on 1st December that Iranians are having trouble accessing foreign currencies due to the plunge in the value of the rial following sanctions.

Syria, Iran’s regional ally, has also come under greater sanctions from the U.S., Europe and some Arab countries over a violent crackdown on pro-reform protests. A European oil embargo is affecting Syria’s revenues and giving the state far less access to foreign exchange, David Butter, regional head for the Middle East at the Economist Intelligence Unit, said last month.

Rising demand for dollars “is affecting our dollar-sale auction,” Salih said. “This isn’t in the interest of the Iraqi economy and it will suck foreign currency reserves … A lot of money in dollars and also deposits which are supposed to be invested in Iraq are being exchanged to U.S. dollars to fund the trade in neighboring countries.”

Foreign exchange reserves in Iraq, holder of the world’s fifth-largest crude deposits, touched $60 billion this year, the most in its history, he said.

Salih added that the central bank will cut three digits from the currency in 2013, reversing a policy it introduced in the 1980s to address the government’s budget deficit.

The yield on the country’s six-month treasury bills fell 1.1 percentage points to 8.2 percent at the last auction on Dec. 13, according to data compiled by Bloomberg, the lowest yield since August 2010. With yields above 8 percent, Iraq has no plan to issue sovereign bonds this year, the deputy governor said.

http://www.iraq-businessnews.com/2012/01/12/iraqi-dinar-under-attack/

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The whole calling everything smoke and mirrors thing is wearing thin. Perhaps they are really saying what they mean and we are the ones that have it wrong.

just want to chime in here and i am on the same line as carrello and zig. this is fantastic news. the financial sector MUST undergo all of the changes we are seeing before iraq emerges to a sustaine

Seriously? Dude you made the wrong decision....this isnt for everyone....but it appears you just like to argue

Lowering Deficit

The country will reduce its budget deficit to 11 percent of economic output this year from 14 percent in 2011, Salih said. In 2013, the central bank will cut three digits from the currency, reversing a policy it introduced in the 1980s to address the government’s budget deficit.

http://www.bloomberg.com/news/2012-01-12/iraq-deplores-currency-attack-as-dollars-flow-to-syria-iran.html

Edited by RRSport
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This is what I posted on the bloomburg article earlier this morning

I like this article, heres my breakdown of a few quotes;

The country will reduce its budget deficit to 11 percent of economic output this year from 14 percent in 2011, Salih said. In 2013, the central bank will cut three digits from the currency, reversing a policy it introduced in the 1980s to address the government’s budget deficit.

The country will reduce its budget deficit to 11 percent of economic output this year from 14 percent in 2011, Salih said.........here he says the country will reduce its budget to 11 percent of economic output this year.....now the next sentence...

Salih said. In 2013, the central bank will cut three digits from the currency, reversing a policy it introduced in the 1980s to address the government’s budget deficit..............do you see.....now he says they are cutting the three digits from the currency in 2013 to address the government’s budget deficit.............which is it?............NOW......or......2013.............IMO a perfect case of miss direction...

Now I'll jump back up to the top of the article:

,” Salih said. “We are now under a currency attack because of the regional situation.” ..........now, they were saying the auctions were large because of the troops leaving causing a demand of USD.......then it was because the bordering countries were dumping the dinar due to the chaos in Iraq.... or was it because of the dinar rate was rising and they needed to increase the amounts sold at auction to lower the exchange rate.......and now its because of Iran and Syria........IMO another case of miss direction because the info is being released from the CBI.......

Anyway my take and thoughts on this article........coffee is really working today.....

Read more:

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The only negative I can see in this is the depletion of Iraq's dollar reserves, hence a reduced capacity to back an "eventual" RV. But, if increased demand for the dollar threatens the Iraqi dinar, the only solution would be an immediate RV. Am I wrong?

Edited by Sanssouci
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The only negative I can see in this is the depletion of Iraq's dollar reserves, hence a reduced capacity to back an "eventual" RV. But, if increased demand for the dollar threatens the Iraqi dinar, the only solution would be an immediate RV. Am I wrong?

While I'm no economist, an RV seems the logical solution to solve the dollar shortage Iraq is now experiencing.

Git 'R(V) Done!

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The whole calling everything smoke and mirrors thing is wearing thin. Perhaps they are really saying what they mean and we are the ones that have it wrong.

Not really. How would it benefit Iraq to telegraph their intentions? If you can explain this, then your point is worthy of consideration.

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Not really. How would it benefit Iraq to telegraph their intentions? If you can explain this, then your point is worthy of consideration."

Well, they could just not say anything. If they aren't saying they are going to RV (which is your point), then what's the point of a "diversion?" I mean, without them saying they are going to RV in a way that has never happened in history, why would anyone think they were?

Edited by lotsofdinar
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Well, they could just not say anything.

A hypothetical cannot prove your point, because they are saying something. In fact, they're saying lots of things. But the one thing they will not say is, "Now, we're going to RV."

If they aren't saying they are going to RV (which is your point), then what's the point of a "diversion?"

The point is precisely that: a diversion. Common sense dictates that they are not going to come right out and say, "Listen up, people! Now, we're going to RV." The only thing that would produce is a run on the banks, totally defeating the point of an RV.

Edited by Sanssouci
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Your right.. no such thing as smoke and mirrors.. just like a ghost..the man said 2013!!

No such thing as smoke and mirrors, huh? Just listen to yourself.

So, Sanssouci, why do you think they are going to RV? If they've never said they were, where did you get the idea they would?

They are never going to say it in so many words! Did you read the article at all? If so, what did you get from it beyond your apparent tendency to take everything you read at face value?

Edited by Sanssouci
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I guess its been smoke and mirrors for 8 years then just so happens..my guess is this time next year we will be talkin about the same thing...

Good guess. :rolleyes:

Sure, I read the article. I don't see anything in it that would suggest an RV. But of course, by your logic, there would be nothing there that would, because they would never let on. Do you think they are sending coded messages to speculators with these articles?

This inability to read between the lines is the LOPsters' Achilles heel. Everything they hold dear is predicated on their unshakeable belief in every word they read in the Iraqi press.

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Woah. I'm not a lopster. I pick currency to speculate on that I believe has the potential to slowly increase in value over a decade or so.

But, to your point, if Iraq telling folks they were going to RV would be disastrous for them, as you suggest, why would they be sending out coded messages that you could "read between the lines" in and conclude an RV was on the way? So, if not for you, who are they coding these messages for?

Edited by lotsofdinar
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Striker you are banging on all 8 cylinders today. Thank's for putting everything together for everyone. When you see it side by side like that it really puts things into perspective as to how close we are. This is the misdirection I have been waiting to see and I didn't even know it.

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