Sunday, 28 August 2011

Iraqi Dinar: Main Drivers & Redenomination

Iraqi dinar are often an interesting possibility for traders who search for currencies with nice potential for profit. but such potential typically comes with higher risk. How investor will predict performance of the dinar?

The first factor to recollect is that Iraq is one of the biggest world exporters of oil, therefore performance of its currency depends on prices for this commodity. Currently oil shows an upward trend, so the Iraqi currency ought to gain. Conversely, decline of oil would hurt the currency. Geopolitical scenario in Middle East is another issue to think about. Wars, social unrest and other threats for stability of the region would cut back attractiveness of its assets, as well as the currency of Iraq.

One factor that worries Forex traders is the planned redenomination of the dinar. Some market participants voiced concern that it’ll be tampering with currency exchange rates. The nation’s central bank claimed that the redenomination is performed simply to simplify transactions in the country, where money is the prelevant methodology of cash exchange. Ahmed Ibrihi, the Deputy Governor of Central Bank of Iraq, stated:

Some people imagine that the state wants to influence prices or exchange rates (a reduction or waiver) by the deletion of zeros and this is not true.

All in all, impact of the redenomination on the Forex market isn’t clear nonetheless. Excluding this uncertainty, the future of the dinar in the short to medium term


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