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Iraqi Dinar: Main Drivers & Redenomination

July 11, 2011 at 17:54 by Vladimir Vyun

Iraqi DinarIraqi dinar can be an interesting option for traders who look for currencies with great potential for profit. But such potential often comes with higher risk. How investor can predict performance of the dinar?

The first thing to remember 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 should gain. Conversely, decline of oil would hurt the currency. Geopolitical situation in Middle East is another factor to consider. Wars, social unrest and other threats for stability of the region would reduce attractiveness of its assets, including the currency of Iraq.

One thing 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 just to simplify transactions in the country, where cash is the prelevant method of money 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 yet. Excluding this uncertainty, the future of the dinar in the short to medium term looks moderately good.

If you have any questions, comments, or opinions regarding the Iraqi Dinar, feel free to post them using the commentary form below.

Earlier News About the Iraqi Dinar: