Thread: Iraq/Dinar News. 09/05 to 01/14/07

Originally Posted by CharmedPiper

Announcement No.(804)

D.G. of Foreign Exchange Control

The 804 daily currency auction was held in the Central Bank of Iraq day Monday 2006 / 11/ 13 so the results were as follows :

Details Notes
Number of banks 17 -----
Auction price selling dinar / US $ 1465 -----
Auction price buying dinar / US $ 1463 -----
Amount sold at auction price (US $) 110.265.000 -----
Amount purchased at Auction price (US $) 2.600.000
Total offers for buying (US $) 110.265.000 -----
Total offers for selling (US $) 2.600.000 -----

Cash amounts sold to the bank and its customers were USD(53.565.000) at a rate of(1465+1+10=1476)IQD\USD .
The amount sold to make transfers abroad was USD (56.700.000) at a rate of (1465-2)+ one dinar as a bank fee and exempt the transferred amount from conversion fee.


D.G. of Investments

Daily price Bulletin buying and selling Sunday 2006/11/12

Currency
Currency Code
Selling Price In IQD
Buying Price In IQD

US Dollar
USD
1465.000
1464.268

I am confused here. When they say the amount sold at auction is 110,265,000 who are they selling it to? If they are selling it, how does that take it out of circulation? It would seem to me if they were buying it, they could then take it out of circulation. It seems the terminology is backwards. Can anyone explain this to me?

worf

Originally Posted by archangel

USA Today Article
Posted 11/13/2006 12:14 AM ET

Q: I invested heavily in Iraq dinars thinking I'd make a mint, but I'm losing money. I'm worried I could lose more. What should I do?
A: You're learning firsthand the dangers of currency trading. Anytime I hear of regular individual investors buying and selling foreign currencies, I just shake my head and hope they don't lose it all.

With currency trading, you're betting not only against and with other speculators like yourself, but also with governments that need to buy or sell currency. You're at a giant disadvantage: Governments have superior information about their economies. You're also taking on the currency trading desks of some of the most sophisticated investment banks in the world. And get this: Currency trading is all about darting in and out of currencies trying to pick up a penny here and a penny there. No wonder a vast majority of individuals who dabble in this market lose their shirts.

The Iraqi dinar is a great example, so I'm glad you brought it up. Back in 2003, buying dinars seemed like a no-brainer. After all, the U.S. military was sure to unseat the Iraqi regime and quickly replace it with a capitalistic society. Some expected Starbucks and McDonald's to spring up on street corners in Baghdad like daisies in a capitalistic field.

"Iraq was very entrepreneurial before Saddam. Baghdad has a history of culture and trade," Robert Hormats, vice chairman of Goldman Sachs International and an expert on the world economy told USA TODAY on April 10, 2003. "It's no slam-dunk, but with the right kind of reforms, (Iraq) could emerge as an important financial and trading center."

Optimism fueled huge interest by individual investors to buy Iraqi dinars. USA TODAY's John Waggoner wrote about the trend back on Aug. 3, 2004.

But the dinar didn't work out like many speculators had hoped. Iraq, and this is not a political statement whatsoever, remains a troubled region. USA TODAY reported Oct. 27, 2006 there's a "prospect of combat in Iraq for at least another four years." You can read this and other Iraq coverage here.

And the result on the dinar has been disappointing. In Aug. 3, 2004, it took 1,460 dinars to buy $1, according to currency value tracker Oanda.com. As of Nov. 9, it takes 1,529, according to Oanda.com. That represents a 5% deterioration in the value of the dinar. MarketWatch, where USATODAY.com gets currency data, reports that it takes 1,468 dinars to buy a dollar.

So whichever source you use, it's fair to say the dinar hasn't panned out for investors. Had you skipped the dinar and bought the Standard & Poor's 500 index (SP500) on Aug. 3, 2004, you would have been up 22% and taken less risk.

The dinar has been another reminder that unless you're a government or a currency trading genius or are traveling to another country or doing business in foreign currency, leave currency trading to the pros.

Matt Krantz is a financial markets reporter at USA TODAY. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at
Leave currency trading to the pros - USATODAY.com

I would like to thank the "multi-colored fish wrap", USA Today, for the smokescreen. MSM nonsense on parade again.

13 November 2006 (Dow Jones)

Frequent insurgent attacks on oil pipelines and a lack of investment in the Iraqi oil sector has cost the war-ravaged country $24.7 billion in lost revenues, which could have been generated from crude oil exports in 2004, 2005 and the first six months of 2006, a new report issued by the Oil Ministry's Inspector General said Sunday.

"Losses of revenues because of suspension of Iraq's crude oil exports from northern Iraq for the period between 2004 and mid 2006 were estimated at $8.5 billion," the independent inspector said in his report, a copy of which was obtained by Dow Jones Newswires.

It said more than $7.5 billion of revenue was lost for the same period because of damage to oil wells, oil pipelines, and lost crude oil and oil products.

The rest of the revenue losses were caused by a drop in oil production, it added.

Constant sabotage against Iraq's northern oil pipelines has kept Iraq's northern oil exports shut down for most of the time since the U.S.-led invasion in 2003. Before the U.S.-led war, Iraq used to export around 800,000 barrels a day from its northern oil fields.

Iraq's current crude oil exports - almost all of which are now from the south - are running at around 1.5 million b/d, while before the war they were 2.2 million b/d.

The report said that crude oil production in 2004 averaged 1.99 million b/d, while the Iraqi Oil Ministry was planning to produce at least 2.68 million b/d.

In 2005, the ministry planned to produce an average of 2.42 million b/d, while actual production fell to 1.85 million b/d. For the first six months of 2006, output was 1.95 million b/d, while the target was 2.66 million b/d, it added.

The inspector's report attributed the decrease in Iraq's crude oil production to "various problems and setbacks", the most important of which was the ministry's failure to implement its ambitious plan to upgrade the country's war- hit industry.

In 2005, only half the more-than $2 billion allocated by the government as an investment plan for the oil sector was spent, the report said.

It said that only $290 million were spent in the first six month of 2006 to upgrade the country's oil industry, out of the government's total allocation of $3.5 billion for the whole of 2006.

The report said many of the so-called "strategic projects" aimed at increasing production, exports and refining capacity haven't been implemented, citing a lack of participation from international companies and contracts because of security issues and a delay in the release of money by the Ministry of Finance.

The report suggested several steps that should be taken in order to increase Iraq's crude oil production and exports. Among these is the creation of an Iraqi national oil company to oversee the country's oil sector; the upgrading of the oil exports measuring systems; and an increase in the capacity of exports at Iraqi oil terminals in the south.

Iraq Lost $24.7 Billion 04-06 On Sabotage, Lack Of Invest -Study | Iraq Updates

Originally Posted by worf

I am confused here. When they say the amount sold at auction is 110,265,000 who are they selling it to? If they are selling it, how does that take it out of circulation? It would seem to me if they were buying it, they could then take it out of circulation. It seems the terminology is backwards. Can anyone explain this to me?

worf

I could be wrong but I think it is the banks in country selling to the Central Bank of Iraq which is the one who regulates rates, trades, etc. This is just my guess...I never could figure this one out.

The question was: To what extent will the poliical changes in the GOI effect the monetary policies of the CBI?
Most americans would be very surprised at how independent the Federal Reserve System is from the fiscal policies of the US Gov. With the exception of deficit spending (which effects the money supply) the Fed acts as an independent central banking function. The same goes for Iraq. I have always been amazed over the last couple of years as to how the CBI and the economy seems to continue on its own course despite the upheavals in the GOI i.e. elections, forming a gov. etc. Since the GOIs spending is consistent with their budget, they actually do a better job of not printing money (by deficit spending) than we do. Monetary policy lies within the responsibility of the CBI and political changes, statements, comments etc. will have little influence on their policies just the same as they do in this country. The Federal Reserve system is govern by a board with the New York fed being the lead system. So you can expect the CBI to follow its own agenda, inspite of what the GOI thinks, says, or does. The monetary system is largely "outside" of the politicians in the GOI, and the CBI is much more influenced by suggestions and guidelines from the IMF and the world bank. However, the good news is that an increase in the currency value has been a goal of the IMF, World Bank from its original exchange in Oct. '03 based on how the monetary system has been put in place and the structure of the banking system that has been established from the beggining. There has been a definable trend towards making their money more valuable through sound monetary policies and economic growth, thus establishing Iraq as an eventual economic powerhouse in the middle east. So, I think in terms of the eventual outcome of this investment, as being well on track and that it will eventually rise to higher significant levels. I feel the CBIs establishment of a peg to the USD in Jan. of '04 to around 1475 as being established after the dinar had risen to a level below 1000 as a way of stabilizing the exchange rate. This allowed stability and increased there currency reserves. I think they knew that increasing currency reserves had to come from outside of the country. Afterall where else would they come from? The problem was that they didn't anticipate how long it would take to form a Govern. reduce outside debt and, since the uprising began in Iraq in April of '04, they didn't anticipate the extent of the violence. So where are they now? They (CBI) are setting on one of the most undervalued currencies in the world. The delays that I have discussed have resulted in a situation that requires a "bold adjust" in the exchange rate value to bring the dinar close to its real market value. Since they have been continuing to sell the dinar at such an undervalued level for so long, the exchane rate has become one of the major contributors to the high inflation rate. This issue was mentioned in the last report from the IMF. In that report, they stated that monetary policies would probably have little effect and that the exchange rate adjustment would have to be considered. I hope these discussion answers some questions. Watching the CBIs auctions in the next couple of days will further establish what type of trend they have in mind. As I stated before, They cannot continue to purchase dinars out of the economy for ever. Thank you for your interest and your comments are appreciated.

Wanted to ask what do folks think about the possibility of the implementation
of the National Salvation Government (NSG). Also, does anyone think the Minister of Finance and CBI Governor will be changed. I definately believe it will R/V and will be big, but they are going to have to make some changes before we see our money. Will probably be sometime within the next 6 weeks or so.
LIT

Originally Posted by Wm.Knowles

The question was: To what extent will the poliical changes in the GOI effect the monetary policies of the CBI?
Most americans would be very surprised at how independent the Federal Reserve System is from the fiscal policies of the US Gov. With the exception of deficit spending (which effects the money supply) the Fed acts as an independent central banking function. The same goes for Iraq. I have always been amazed over the last couple of years as to how the CBI and the economy seems to continue on its own course despite the upheavals in the GOI i.e. elections, forming a gov. etc. Since the GOIs spending is consistent with their budget, they actually do a better job of not printing money (by deficit spending) than we do. Monetary policy lies within the responsibility of the CBI and political changes, statements, comments etc. will have little influence on their policies just the same as they do in this country. The Federal Reserve system is govern by a board with the New York fed being the lead system. So you can expect the CBI to follow its own agenda, inspite of what the GOI thinks, says, or does. The monetary system is largely "outside" of the politicians in the GOI, and the CBI is much more influenced by suggestions and guidelines from the IMF and the world bank. However, the good news is that an increase in the currency value has been a goal of the IMF, World Bank from its original exchange in Oct. '03 based on how the monetary system has been put in place and the structure of the banking system that has been established from the beggining. There has been a definable trend towards making their money more valuable through sound monetary policies and economic growth, thus establishing Iraq as an eventual economic powerhouse in the middle east. So, I think in terms of the eventual outcome of this investment, as being well on track and that it will eventually rise to higher significant levels. I feel the CBIs establishment of a peg to the USD in Jan. of '04 to around 1475 as being established after the dinar had risen to a level below 1000 as a way of stabilizing the exchange rate. This allowed stability and increased there currency reserves. I think they knew that increasing currency reserves had to come from outside of the country. Afterall where else would they come from? The problem was that they didn't anticipate how long it would take to form a Govern. reduce outside debt and, since the uprising began in Iraq in April of '04, they didn't anticipate the extent of the violence. So where are they now? They (CBI) are setting on one of the most undervalued currencies in the world. The delays that I have discussed have resulted in a situation that requires a "bold adjust" in the exchange rate value to bring the dinar close to its real market value. Since they have been continuing to sell the dinar at such an undervalued level for so long, the exchane rate has become one of the major contributors to the high inflation rate. This issue was mentioned in the last report from the IMF. In that report, they stated that monetary policies would probably have little effect and that the exchange rate adjustment would have to be considered. I hope these discussion answers some questions. Watching the CBIs auctions in the next couple of days will further establish what type of trend they have in mind. As I stated before, They cannot continue to purchase dinars out of the economy for ever. Thank you for your interest and your comments are appreciated.

I was wondering in your opinion how long could they carry auctions on at this rate....days, weeks, or months. I didn't know if this is a long-term practice that will takes weeks or months to accomplish??? Your opinion is greatly valued. Thanks.

I've got to go out otherwise I'd do it, but can one of our American buddies phone and confirm this one way or another please. Least then we can either put it to rest etc.

I found this info after I posted, this was posted at IIF by StephanieF...

If you want to buy dinar from BOA I would suggest that you go to a branch on the 13th of November and walk up to a teller and ask to purchase foreign currency, when you are asked which currency say IQD, no need to mention Iraq. If your branch says they are not selling it then ask the manager to call 800-841-4000 and ask to be put in touch with any of the New York branches so they may speak to a manager at that location so they can help him purchase for a currency sell.[/

The question was: :"How long can they (CBI) carry on auctions in the manner that they have been for the last six auctions?
What surprises me most is that they have been conducting large auctions in an effort to remove dinar from the local economy in such a short period of time. Its almost like a "panic" reaction. My conservative side would have advocated for a much less dramatic monetary intervention. Slower, over a longer period. I have heard too many estimates of the base money supply to make an intelligent guess, but its evident that this can NOT go on for long. I sense that it is a "short term" intervention. Which translates for us that these will be exciting times in the next few days or weeks. Thank you for your kind comments.

Originally Posted by Wm.Knowles

The question was: To what extent will the poliical changes in the GOI effect the monetary policies of the CBI?
Most americans would be very surprised at how independent the Federal Reserve System is from the fiscal policies of the US Gov. With the exception of deficit spending (which effects the money supply) the Fed acts as an independent central banking function. The same goes for Iraq. I have always been amazed over the last couple of years as to how the CBI and the economy seems to continue on its own course despite the upheavals in the GOI i.e. elections, forming a gov. etc. Since the GOIs spending is consistent with their budget, they actually do a better job of not printing money (by deficit spending) than we do. Monetary policy lies within the responsibility of the CBI and political changes, statements, comments etc. will have little influence on their policies just the same as they do in this country. The Federal Reserve system is govern by a board with the New York fed being the lead system. So you can expect the CBI to follow its own agenda, inspite of what the GOI thinks, says, or does. The monetary system is largely "outside" of the politicians in the GOI, and the CBI is much more influenced by suggestions and guidelines from the IMF and the world bank. However, the good news is that an increase in the currency value has been a goal of the IMF, World Bank from its original exchange in Oct. '03 based on how the monetary system has been put in place and the structure of the banking system that has been established from the beggining. There has been a definable trend towards making their money more valuable through sound monetary policies and economic growth, thus establishing Iraq as an eventual economic powerhouse in the middle east. So, I think in terms of the eventual outcome of this investment, as being well on track and that it will eventually rise to higher significant levels. I feel the CBIs establishment of a peg to the USD in Jan. of '04 to around 1475 as being established after the dinar had risen to a level below 1000 as a way of stabilizing the exchange rate. This allowed stability and increased there currency reserves. I think they knew that increasing currency reserves had to come from outside of the country. Afterall where else would they come from? The problem was that they didn't anticipate how long it would take to form a Govern. reduce outside debt and, since the uprising began in Iraq in April of '04, they didn't anticipate the extent of the violence. So where are they now? They (CBI) are setting on one of the most undervalued currencies in the world. The delays that I have discussed have resulted in a situation that requires a "bold adjust" in the exchange rate value to bring the dinar close to its real market value. Since they have been continuing to sell the dinar at such an undervalued level for so long, the exchane rate has become one of the major contributors to the high inflation rate. This issue was mentioned in the last report from the IMF. In that report, they stated that monetary policies would probably have little effect and that the exchange rate adjustment would have to be considered. I hope these discussion answers some questions. Watching the CBIs auctions in the next couple of days will further establish what type of trend they have in mind. As I stated before, They cannot continue to purchase dinars out of the economy for ever. Thank you for your interest and your comments are appreciated.

Thanks for the great insight. I have a quick question. What rate in your opinion do you expect to see and will it be one reval or a series of smaller pegs? What is your time frame for them seeing this through? Thanks!