Thread: IMF April 30, 2007

Originally Posted by kuga

I actually don't know where or why the fils ever came up as a justfication to the rate. I got to the .19 rate without the fil part of the equation.

Hello kuga,

I believe cooldophins is referring to the Dollar Peg equation that either 1000 or 100 would be used in that equation along with a 3 zeros removed that would be done too as they have stated. The equation you are trying to explain to the membership is the SDR equation. Which is what Kuwait just switched to Yesterday. From a Dollar Pegged Currency to a SDR Pegged Currency. In that move the Kuwait Dinar gain .37 in value. I believe they are up and over $4 now... Havent checked but it is illrealivent to this excepted that the fact they have revalued as said they were going too...Just waiting on the other five now...

Originally Posted by lglwzrd

Special Drawing Right (SDR)
International reserve asset created by the IMF in 1969 as a supplement to existing reserve assets.
• SDR Allocation. Distribution of SDRs to members by decision of the IMF. A "general" allocation requires a finding by the IMF that there is a global need for additional liquidity.
• SDR Assessment. An assessment levied by the IMF, at the same rate for all participants in the SDR Department, on a participant’s net cumulative SDR allocations, to cover the expenses of conducting the business of the SDR Department.
• SDR Department. This department, an accounting entity rather than an organizational unit of the IMF, records and administers all transactions and operations involving SDRs.
• SDR Interest and Charges. Interest is paid to each holder of SDRs. Charges are levied, at the same rate, on each participant’s net cumulative SDR allocations. The SDR interest rate is determined weekly by reference to a short-term market interest rates on the currencies used for SDR valuation. Interest on SDR holdings is paid, and charges on net cumulative allocations are collected, on a quarterly basis, and are settled on the first day of the subsequent quarter.
• SDR Use. Participants in the SDR Department (currently all members of the IMF) and prescribed holders may use SDRs in a variety of voluntary transfers, including transactions by agreement, swap arrangements, forward operations, and so forth. Participants may also use SDRs in operations and transactions involving the General Resources Account (GRA), such as the payment of charges and repurchases (repayments). In addition, the IMF ensures that a participant with a balance of payments or reserve need to acquire foreign exchange is able to use its SDRs in a "transaction with designation".
• SDR Valuation. The currency value of the SDR is determined daily by the IMF by summing the values in U.S. dollars, based on market exchange rates, of a basket of four major currencies—the euro, Japanese yen, pound sterling, and the U.S. dollar. The SDR valuation basket is normally reviewed every five years. The last review, which took place in 2000 (see Press Release No. 00/55), resulted in a revision of the weights assigned to each currency in order to take into account the introduction of the euro on January 1, 1999 and the growing role of international financial markets. The revisions in the valuation basket became effective on January 1, 2001 (see Press Release No. 00/87).

Thanks for that explanation lglwzrd!!!!!!!!!!

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Thanks for the links iceman

Does todays kawait/USD exchange rate today equal $3.57? It says .28 but I can't remember how to convert that to USD? I hope I did it right! LOL

Originally Posted by cigarman

Does todays kawait/USD exchange rate today equal $3.57? It says .28 but I can't remember how to convert that to USD? I hope I did it right! LOL

try xe,com!

Originally Posted by cigarman

Does todays kawait/USD exchange rate today equal $3.57? It says .28 but I can't remember how to convert that to USD? I hope I did it right! LOL

That is correct Cigarman. Just take 1 and divide it by the .28. It works for those types of rates when I have done them.

could Iraq get away with pegging their Dinar against this basket of currencies?

any reval would be sweet, but could they do this if they wanted to?

Markets focus on UAE dollar peg Published: Tuesday, 22 May, 2007, 08:40 AM Doha TimeA Kuwaiti man buys US dollars from a currency exchange in Kuwait City on Sunday. After Kuwait, the UAE is the most likely candidate to loosen a dollar peg, according to a Reuters surveyDUBAI: The United Arab Emirates central bank kept markets guessing yesterday on whether it might change its foreign exchange policy, after Kuwait dropped its dollar peg and adopted an exchange rate based on a basket of currencies.
A UAE revaluation, seen as more likely after Kuwait’s switch on Sunday, would make regional monetary union even more difficult by a 2010 deadline and send another bearish signal from Gulf oil exporters about the outlook for the weak dollar.
Kuwait will now need to buy fewer US assets when it accumulates reserves to defend the exchange rate, although the impact on dollar would be negligible, Scandinavian bank Nordea said in a research note.
“If other countries in the region will follow, however, we see a risk of a modest dollar weakening,” it said.
After Kuwait, the UAE was the most likely candidate to loosen a dollar peg which the six oil producers had agreed would stay in place until monetary union, according to analysts polled by Reuters in March. “We shall be closely watching the UAE, which should be the next one on the list,” said Elisabeth Gruie, Emerging Markets Strategist at BNP Paribas in London.
However, the office of UAE central bank governor Sultan Nasser al-Suweidi said he would not comment.
Kuwait cited its inflation rate, which touched 3.7% in December and 5.5% at the end of March, as the main reason for abandoning its dollar peg.
With the dollar hitting a record low against the euro in April, Kuwait’s central bank was forced to act in the “national interest” and break ranks with fellow Gulf Arabs states over the currency pegs, the central bank said on Sunday.
The UAE, where inflation hit 10% at the end of last year, and Qatar, with record inflation of 11.83% in 2006, had more reason to cushion their economies from the rising cost of imports, Citigroup analyst David Lubin said in a note.
Qatar’s central bank governor ruled any change of exchange rate policy yesterday. The central banks of Saudi Arabia, the largest Arab economy, Oman and Bahrain did the same on Sunday.
“A build up of speculative positions betting on further revaluations in the region seems very likely now,” Lubin said in the note.
The UAE dirham hit a one-week high of 3.6710 per dollar compared with its official peg of 3.67275. The Saudi riyal touched a six-week high at 3.7498 per dollar, just off its official 3.75 per dollar peg.
Like Kuwait, the UAE cut interest rates in April to deter speculators betting that the central bank would allow the currency to appreciate as the dollar slid.
Suweidi first raised the prospect of a currency revaluation in an interview with Reuters in January, although he has repeatedly said he would not act alone.
“The UAE has said it won’t move unilaterally, but now it wouldn’t be (acting) unilaterally,” said Steve Brice, chief Middle East economist at Standard Chartered Bank in Dubai.
Kuwait also cited the diminishing prospect of meeting the 2010 deadline for a single currency as one factor behind its decision to drop the dollar peg, adopted in 2003 to create a platform regional economic integration.

Meanwhile, an Islamic member of Jordan’s parliamentary Economic Affairs Committee yesterday urged the government to follow Kuwait’s steps in ending the 12-year-old peg between the national currency, the dinar, and the US dollar.
“Jordan should follow Kuwait’s steps in tying the dinar to a basket of currencies, because the drastic decline in the dollar’s exchange rate is having negative repercussions on the Jordanian economy,” Jaafer Hourani said.
“The decline of the dollar’s exchange rate versus other major currencies has also helped to shrink the purchasing power of the Jordanian dinar and spur the inflation rate,” he added.
Hourani belongs to the Islamic Action Front (IAF), Jordan’s largest political party, which is at odds with the US policy in the region.
The Jordanian dinar has been pegged to the greenback since October 1995.
Central Bank of Jordan officials have shun calls for ending the dinar-dollar peg, saying it bestowed stability on the country’s commercial dealings with other parts of the world.
Hourani contended that the continuation of the dinar-dollar relationship was motivated by “political reasons.” – Reuters, DPA

With all the most recent information that been presented, how confident are you that an RV will occur on or around June 1, 2007. Use either precentages or a scale of 1 to 10 (with 10 being near 100% sure of it happening). All the information posted has me totally confused and ambivalent.