The Dinar (IQD), symbol (د.ع.) is the official currency of Iraq and is issued by the Central Bank of Iraq (CBI). The Indian Rupee was the official currency of Iraq before the introduction of the Dinar. The history of the Iraqi Dinar dates back many years, according to XE.com, the Indian Rupee was replaced by the Iraq Dinar in 1932.
At the time, the Dinar was pegged to the British Pound and exchanged at the rate of 1 Dinar to 11 Rupees. In 1959, the peg was switched to the US Dollar in a move that saw 1.00 IQD exchange at USD 2.80. The USD to IQD exchange rate remains the most popular Iraq Dinar exchange in the market today. The old currency was printed using the Swiss printing method, but this was replaced in 1991 as a strategy to enhance security.
Trading in the Iraq Dinar
Trading in Iraq Dinar is seen by many investors in the US and around the world as a lucrative venture that promises high returns. However, it is important to take necessary precautions and only deal with reputable dealers to obtain more lasting benefit from trading. Some of the tell-tale signs to spot a dishonest dealer according to Investopedia, include:
- The scheme is promoted by unregistered currency dealers or individuals
- The scheme is operated by street based dealers who offer high variations in rates, high mark-up fees or exaggerate returns
- The currency dealing entity avoids the use of more qualified, open and fair marketing strategies.
- The agent offers outlandish pronouncements stating Iraq Dinar is a perfect investment that guarantees high returns in the short term.
Iraq is easily distinguished as one of the largest exporters of oil in the world. In 2012, the country’s oil export was about 3.5 million barrels per day. Besides fluctuations in oil prices, the other factors that are known to affect the value of the Iraqi Dinar include regional instability, civil war and Foreign Direct Investment (FDI). However, these effects are generally subdued due to Iraq’s huge oil reserves and the pivotal role the oil role plays in stabilizing the country’s economy and currency as was the case during the infamous Iraq – Iran war. The leading international players in Iraq’s oil market today include multinationals such as Exxon Mobile, Total, Shell and BP.
Factors Affecting the Value of the Dinar
Unlike most currencies that are traded in regulated banks and registered Forex bureaus, the Iraqi Dinar is widely traded in the black market and select money exchangers. A lot has been said about the Dinar, including its prospects as a bright long term investment. Investors, especially in Iraq are getting increasingly bemused about the highly-anticipated redenomination, which many mistake for currency revaluation. The confusion stems from reports that IQD is greatly undervalued against the USD and other major global currencies. For this reason, the government has long proposed a redenomination move, where several zeros will be dropped to stabilize the currency’s purchasing power.
Redenomination is usually carried out where there is a level of inflation. Under such undertaking, the higher value notes may be equated with small value notes. For example, the central bank may decide to turn 1000 old Iraq Dinars into 1 New Iraqi Dinar. When the redenomination finally takes place, some experts say the move may not affect the country’s Forex exchange nor benefit the economy. In fact, some point that a reversed valuation may restrict growth, affect debt repayment and create more barriers to investors who want to invest in Iraq. Forex trading is one of the most powerful investment vehicles for investors who want to trade on the Dinar, especially over the long term because of the speculative nature of currency trading.
Forex currency trading is also greatly impacted by external factors in the international stage, many of which are difficult to control. For instance, in 2012, the Dinar dropped to about a tenth of US cent. The currency experienced serious downward pressure because of international economic sanctions imposed on its neighbours, Syria and Iran. To avoid exposure to many risks, investors should consider trading and investing in well-regulated markets. According to an excerpt published on Reuters, the US investor’s appetite for Iraq currency is part of a wider push to find investment opportunities that promise great returns. The interest in the Iraq Dinar mainly stems from near zero interest on US savings and Certificates of Deposits in the market.
The Value of the Dinar
The Dinar currency traders generally profit when the currency rises against the dollar even at subtle levels. It is important to remember that the old 1 Iraq Dinar traded for $3.21 before the UN embargo imposed on Iraq after the Kuwait invasion in 1990. The currency plummeted over the coming years, hitting a fraction of a penny in August 2002 due to internal strife. Currency speculators, however, remain optimistic that the country’s oil driven economy will experience huge growth over the coming years and the Dinar will hit a favourable exchange rate of between $1 to $3 to the dollar. The Dinar started drawing considerable worldwide attention in 2003 immediately after the ouster of Saddam Hussein.
Purchasing Iraqi Dinar in the US
One can buy Iraq currency from several currency exchange outlets in the US. US investors betting on the Dinar are encouraged by growing Iraqi oil exports and demographics along with high investments in the petroleum industry. To make the currency more secured, the country’s CBI has taken several measures to fight counterfeiters. The new Dinar notes have several security features including protective film, unique serial number format, security thread with demetallized CBI, glowing UV en-clasp denomination value and use of a unique cotton paper. In 2003, Iraq introduced new unified Dinar notes that replaced the Saddam notes. Today, the most frequently used bank notes in the country are the higher denomination notes such as the 1,000, 5,000, 25,000 and 50,000 dinars.