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Why Is the Iraqi Dinar So Often in the Spotlight?

The Iraqi dinar has been the official currency of Iraq since the 1930s. It is a fixed-rate currency used by people living in Iraq and some foreign exchange investors. It used to be pegged to the British pound and the American dollar, but the Iraqi government has set it since the Gulf War in the 1990s.

The inflation of the dinar is so high that its subdivisions, called fils, became obsolete, but it should be mentioned that there are 1000 fils in one Iraqi dinar. The symbol for the Iraqi dinar is د.ع, and the international code is IQD.

Are People Investing in Iraqi Dinar?

Although it is a weak and volatile currency with a tendency to depreciate often, there are still reasons to hold and use the Iraqi dinar. Collectors value the currency of Iraq because of its history and the rarity of some of the banknotes and old coins.

Tourists and business investors who travel to Iraq use it to get around the country. Regular tourists are most likely to buy dinars in the exchange offices in the cities or at the airport. On the other hand, those who travel for business use currency broker services for lower rates and fees.

There is another reason to hold Iraqi dinars, and it is to use them as an investment. Forex investors purchase a certain amount of Iraqi dinars and wait for them to revalue. Some experts speculate that soon there will be significant economic growth in Iraq, and their currency will increase in value.

The risks surrounding the Iraqi dinar are higher than with other currencies, referring to the fear of high inflation and possible re-domination. However, there are ways to sell your Iraqi assets quickly if needed. If you are interested in forex trading, learn more about why people invest in Iraqi dinar.

History of the Iraqi Dinar

The Iraqi dinar replaced the Indian rupee after the First World War, and it was introduced as a fixed currency pegged to a British pound. During the 1960s, the US and Iraq developed a diplomatic and economic relationship, which shifted the currency towards the US dollar. The 1990s marked a turning point, after which the government stopped pegging dinar to other currencies.

The war and the subsequent sanctions made the previous Swiss printing method impossible. In addition, the government printed an excessive amount of money. The Iraqi dinar then became divided into Swiss-made banknotes and coins and poorly-made Sadam money. This prompted two things:

The Saddam dinar wasn't accepted in Iraq's Kurdish region, which continued using the Swiss dinar. Swiss dinar saved the Kurdish region from inflation by having a much higher value than the volatile and devalued Sadam dinar.

Saddam dinars were poorly minted, so they were easy to counterfeit. Moreover, the devaluation was increased by speculators and fraudsters who sold them on a black market until 2004, when the new notes were printed to replace both Saddam and the Swiss Iraqi dinar.

Iraqi Dinar Denominations

The Iraqi dinar comes in banknotes and coins and has ten different denominations altogether. There are three coin denominations, and their value is 25, 50, and 100 IQD. Their design honors the main rivers of Iraq - Tigris and Euphrates.

There are only seven banknote denominations of the Iraqi dinar - 250, 500, 1 000, 5 000, 10 000, 25 000, and 50 000 Iraqi dinars. Each bill is made with special counterfeit measures to prevent faking the money and selling it on a black market. That was not a rare occasion during the rule of Saddam Hussein.

The 50 000 IQD bill is rare to find, it is the newest denomination issued in 2015, and it is the largest banknote ever printed by the Central Bank of Iraq. Up until then, there was a 50 dinars bill that got discontinued due to obsoleteness.

Bills printed before 2003 are not valid in today's Iraq. They had a picture of Saddam Hussein and were not inclusive toward the Kurdish people. Bills that are in circulation right now have inscriptions in both official languages - Arabic and Kurdish and honor the Great Mosque of Samara.

The State of the Iraqi Economy

Iraq is a country that lived through decades of armed conflicts and wars. From the 1990s until 2017, ISIS was trying to rule Iraq, and although they lost, the country hasn't recovered. On top of that, COVID-19 struck the whole country and even further exacerbated the poverty of the Iraqi people and the devaluation of the dinar.

Iraq has only a few exporting resources, and it is mostly petroleum, oil, and gold – all of which are sold in US dollars. The fact that they are selling their primary exporting resources on a forex market in US dollars means that there are very few Iraqi dinars outside Iraq.

Forex investors who believe there might soon be a revaluation and Iraqi tourists make up for almost all actors in a forex market who use Iraqi dinar. However, the corona crisis didn't help revive the dinar, and the government announced a 20% devaluation during the pandemic.

How Is the Value of the Iraqi Dinar Set?

The Iraqi dinar is a currency with a fixed exchange rate, and the Iraqi government determines its official value against other currencies on the forex market. The government-organized auction sets the worth. More precisely, The Central Bank of Iraq organizes the auction where the officials discuss how to set the value against the US dollar.

The fact that the rate is artificially created and is not following the supply-demand balance opens many doors for fraudulent dinar dealers who charge impossibly high rates.

Beware of Investment Schemes

Many would advise against investing in the Iraqi dinar, just because there are fraudsters who would like to take advantage of naive investors. As the currency tends to vary, revalue, and devalue unexpectedly, a person can quickly get confused.

Many people believe that the Iraqi economy is on the incline and rising each month, with oil and petroleum prices going up and foreign investments spreading throughout the country. They argue that this is a good enough reason to invest in the Iraqi dinar and patiently wait for its revival.

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