AdminBob: Banking sources: Outlook down the dollar against the Iraqi dinar in the coming days 24/07/13 05: 16
Parliamentary sources confirmed, that the rate of the Iraqi dinar will rise versus the dollar in the coming days in light of steps taken by the Central Bank of Iraq.
A source in the Iraqi Central Bank said he expected the dollar to decline and that the rate of the Iraqi dinar has improved more over the next few days according to the indications of the Central Bank and the market. LINK
AdminBob Site Owner: Expectations down the price of the US dollar against the Iraqi dinar 2013.07.240057 economy/Arabic
Baghdad on July 24/Qena/economic sources predicted that the Iraqi dinar rose against the dollar in the coming days in light of steps taken by the Central Bank of Iraq.
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The CBI said that parliamentary officials and economists praised the reduction in the exchange rate of the dollar and rise of the dinar in the light of steps taken by the Central Bank and banks in this area, which is reflected in this activity, expected to continue this decline of the dollar and the dinar improved more during the next few days, according to the indications of the Central Bank and the market.
The report recommended that the International Monetary Fund Iraq the pace of structural reform to boost growth and job creation in the private sector, and the need for continued governance of the Bank's foreign reserves and the Development Fund for Iraq.
A bank source said earlier that Iraqi banks Association agreed with the World Bank to reduce the cash dollar exchange rate to 1180 DT instead of 1,184 Iraqi dinars from last Sunday and predicted that all banks responded to this initiative, stressing that such a reduction would bring significant benefit to the citizen. Qena 1011 GMT 2013/06/24 LINK
ReVbo: "A bank source said earlier that Iraqi banks Association agreed with the World Bank to reduce the cash dollar exchange rate to 1180 DT instead of 1,184 Iraqi dinars from last Sunday and predicted that all banks responded to this initiative, stressing that such a reduction would bring significant benefit to the citizen."
The 4 pip reduction can't possibly be the "significant benefit to the citizen" he's talking about, right?
He's got to be talking about the big change that comes once they've got the rate stabilized at near the program rate, because 4 dinars per dollar at a rate of 1180:1 is saving Iraqis a third of a penny, and a third of a penny is hardly "significant." Ordo ex Chao
PGLD: That's been my contention all along Rev. The think a 4 pip move is going to work wonders...I don't get it. Turki's "surprise" is going to be moving a handful of pips, lol. Now they can buy a piece of gum and put another piece on layaway with the "significant" increase.
The biggest influence the world can have over them is to overtly pull out all investments and any talk of investing, and have a Mexican stand-off. We'll see who blinks first. Has everyone is iraq forgotten the benefits of the "former glory" fo the dinar value?
Kaperoni Moderator: ReVbo, this IMF doc is a great read. Pages 28-32 explain how countries exit a closed monetary policy and engage in a float. It is posted in the Research Library, but here is a direct link and some highlights...it is very encourging when you compare what is stated in this, to what we are seeing with the CBI. LINK
"Early preparation for an exchange rate float can bolster the chances of success of the exit strategy gradual or rapid. Many of the operational areas require substantial time to build and the groundwork should be laid under the peg."
"Several aspects of the operational prerequisites—including securing central bank independence, improving inflation forecasting capacity and monetary policy transparency, developing information systems on foreign exchange risk, and increasing information on balance of payments developments—can be undertaken early on, even before exiting a peg."
"The second stage may involve allowing some exchange rate flexibility to stimulate foreign exchange market activity, and continuing to develop other operational areas. Intervention policies can be addressed at a relatively later stage, once greater exchange rate flexibility is embraced."
"While the pace of exit is not a matter of choice under disorderly exits, the authorities still need to prioritize among the operational requisites to manage the flexible regime. In this regard, stabilizing the exchange rate is usually the top priority, given the extremely high level of volatility following the exit, particularly in emerging market economies (Figure 5)."
"Stabilizing the exchange rate, in turn, often hinges on eliminating the dollar shortage in the market and maintaining monetary control by avoiding massive liquidity support for the financial system (Berg and others, 2003). Efforts should also be made to signal a conservative monetary policy stance, although the explicit design of an alternative nominal anchor would probably take more time. "
Kap: We can see from this document that the CBI is following the book prior to leaving the closed monetary policy they currently are in. They want to stabilize the exchange rate, eliminate the dollar shortage (huge auctions as of late) which then in turn will act as a "buffer" during the transition.
Personally, I think Turki is getting ready to launch the dinar internationally (Forex) and what we are seeing from the CBI is those preparations. That will be the "surprise."
ReVbo Moderator: That wasn't my point, PG. I think he's saying something like, "I know it doesn't sound like much, but getting the street rate and the CBI rate in line is going to bring a great benefit," which will be the liberating of the exchange rate to international convertibility,
and an actually-significant increase in value, not just 4 pips, but he can't say that, so it comes out sounding like he's trying to convince Iraqis that 4 pips is a big deal.
As tlar has been saying, these banks can't continue to sell at 1180, or even 1184 for that matter, for very long, so if the 4 pips is indeed the "great benefit," it will be a very short-lived benefit. Ordo ex Chao
Tomceejay: 4pips would not be the big surprise Turli has spoken of
Kaperoni Moderator: Turki is just greasing the wheels before the road trip...sit back and let it come to us
ReVbo Moderator: My father, who goes by the handle "Zee" on DA, just made a great point, which expands on tlar's, about this new program. It should be the CBI taking the hit here, not the independent banks.
Instead, CBI continues to make its 13 dinars per dollar and the banks make nothing?! If I'm an independent bank president and Turki comes to me asking me to forego all my profit while he sits up in his ivory tower collecting his 13 dinars, I'm going to tell him to stick it. Unless... ;) Ordo ex Chao
Terry: ReVbo, I agree 100%. There has to be a big IF. and we all know what it is.
Money_Matters: Great post Kap! We will keep our eyes open to see if this is true..
Mike: Thanks for the explanation Kap. I, too, was disappointed at a 4 pip move but when you put into context everything changes.
Tlar: It begs the question "what's in it for the for profit banks to give up the largest part of their profit"?
We know it can't be patriotism because some of these banks are owned by foreign nationals and foreign investors. The stick is the banks are taking an immediate hit on their profits which they can't do for long.
Maybe the carrot is such an improvement to the rate that the average Iraqi starts using the banks again. We know that this commission is more important to at least some of these independent banks because they have stated that they make more money selling dollars than they do on the depositors.
Some banks even favor the sales of dollars over their regular account holders. We also at least think that nothing will change the value of the dinar until these rates are within the proper range of about 2%.
If this plan of the independent banks temporarily making no profit on sales of dollars works, their has to be a reward or a pretty decent incentive of some kind that terminates this plan.
If it is not achieved within 30 days this plan is kaput as these for profit banks will definitely say enough and gravitate back to profit in order to survive as any company must. I see this as putting the currency in a pressure cooker and it puts the CBI on a Shiite or get off the pot situation.
If the plan is successful the CBI will do something relatively quick. If this plan does not bring the rates together, Turki will be fighting an even worse uphill battle to get these rates right as these same banks that are doing these "selfless" acts backfire on the CBI. I think Turki is taking a risk here and I just hope it works.
Kaperoni Moderator: The thing is, 80% of currency auctions are handled by private banks..and their primary source of revenue. Now, we know that has to change..and the banks need to stop being currency traders and start functioning like banking institutions.
I posted a few weeks back an article with staggering numbers...next to nil on deposits and no access to capital for investments. So IMO, the CBI is trying to transition them..not so much to stop the auctions, just rely on other services for revenue.
And that only makes sense if the CBI is going to support them by accepting Article VIII of the IMF and making the dinar internationally convertible. An influx of capital will then come in.
Tlar: Well said Kap. I might add that the 80% banks have relied heavily on the sales of dollars to stay afloat. By nature no company will sacrifice itself and its own well being without some kind of a major incentive. I think you just supported my argument above with this sentence,
"I posted a few weeks back an article with staggering numbers...next to nil on deposits and no access to capital for investments. So IMO, the CBI is trying to transition them"
Again what company would sacrifice the only area of profitability without some kind of assurances that the sacrifice will yield a better result. These banks are sacrificing today for a hope for a better tomorrow.
ReVbo Moderator: Amen, tlar and Kap. If this doesn't do it, nothing will. As a business owner myself, I have all too personal experience with this. You do a loss leader like this, hoping that it will bring you some real benefit in the near future.
If it doesn't, you stop, and you look, with major skepticism, at the scam artist who asked you to step out on that limb. These banks are taking a serious risk, just by being banks in Iraq.
If they are not quickly rewarded for "taking one for the team," so to speak, they're gonna bail on this program as quickly as they got in. Ordo ex Chao
Kaperoni Moderator: Tlar, take a look at this... I think this is ur sales job...
joeg: Kap, thanks, great explanation about stabilizing the rate. With the IMF report and some of your recent explanations, I actually feel better about this than I have in a while. Although we disagree on the timing, you give me comfort in believing that something will truly happen eventually to make us rich. Thanks again.
Tlar: Thanks again Kap. I think you are right. This is the meeting that was decisive in the Associations decision to make no money selling the dollar. I would love to read the minutes from this meeting as it appears it was well represented by the pro "increase the dinar" crowd.
Oldtown: Kap Tlar how long do you think the banks are going to do this a week 2 weeks what
U mad bro?: oldtown, I think it is saying. .
"the rate of the Iraqi dinar will rise versus the dollar in the coming days"
Tlar: oldtown, I would be surprised if it goes 30 days. I8 am cautiously optimistic.
U mad bro?: Tlar, is it your opinion that we will see Iraq move to article VIII sometime in next 30 days?
Tripphood: Thanks to all, very good analysis of the information at hand. I believe that you have restored a little more faith that we will see positive results......soon. You guys must have a lot of time on your hands to make sense out of all of these articles. Thank you all for what you do, it is much appreciated.
Enorrste: Once again I agree with KAP entirely. This stabilization move on the part of the CBI will get it to 1166 shortly and it will then hover there, stable as a rock, until the announcement of the free float.
Incidentally, the word "pip" is the wrong one to use here. We should be using the word "point", since a "pip" is 1/100th of a point. FYI Enorrste
Punisher: I would love to jump for joy like everyone in this thread but we have heard "in the coming days" for a long while now and should already know what it means...months! The good news is August is next Thursday and by the time we know it we will all be yelling Happy New Year :)
AdminBob Site Owner: Banking sources: Outlook down the dollar against the Iraqi dinar in the coming days Thursday, 25/07/2013 | Source:
Parliamentary sources confirmed, Tuesday, that the rate of the Iraqi dinar will rise versus the dollar in the coming days in light of steps taken by the Central Bank of Iraq.
According to a source in the Iraqi Central Bank "parliamentarians, officials and economists praised the reduction in the exchange rate of the dollar and the high price of the Iraqi dinar in the light of steps taken by the Central Bank and banks in this area, which is reflected in this activity".
The source stressed that "this is expected to continue to decline for the dollar and that the rate of the Iraqi dinar has improved more over the next few days according to the indications of the Central Bank and the market."
The report recommended that the International Monetary Fund, Iraq the pace of structural reform to boost growth and job creation in the private sector, and the need to continue the rational management of the foreign reserves of the Central Bank of Iraq and the Development Fund for Iraq.
The Bank had earlier said (19 July), that Iraqi banks Association agreed with the Central Bank reduced the cash dollar exchange rate instead of the dinar to 1180-1184 Iraqi dinar as of last Sunday, with the expectation that you responded to this initiative, all banks, he indicated that this reduction will bring great benefit to the citizen. LINK
DarbSalad: It will bring minimal benefit to the citizens. Still have a national currency will very little purchasing power. I believe the per capita income in Iraq is barely over $4,000.00. They will not boost growth and job creation in the private sector until they start this float. The CBI continues to defy the recommendations of the IMF.
PGLD: My sentiments too Darb. I'm struggling to understand the "great benefits to the citizens", or any group for that matter.