Despite Government Measures, Iraqi Dinar Continues to Fall against USD

The Governor of the Central Bank speaks before the Parliamentary Finance Committee about the exchange rate. (Iraq News Agency)
The Governor of the Central Bank speaks before the Parliamentary Finance Committee about the exchange rate. (Iraq News Agency)
TT

Despite Government Measures, Iraqi Dinar Continues to Fall against USD

The Governor of the Central Bank speaks before the Parliamentary Finance Committee about the exchange rate. (Iraq News Agency)
The Governor of the Central Bank speaks before the Parliamentary Finance Committee about the exchange rate. (Iraq News Agency)

The Iraqi dinar continued to fall against the US dollar, despite the government’s vigorous measures. This decline negatively affected commercial transactions in most of the wholesale markets in Baghdad and the provinces.

On Monday, the exchange rate reached IQD 1,540 to the dollar in the parallel market, compared to IQD 1,320 to the dollar in the official currency auction approved by the Central Bank.

A wholesaler in the Shorja commercial souk in Baghdad told Asharq Al-Awsat that the market was witnessing a great stagnation, adding that the movement of buying and selling has declined recently due to the fluctuating exchange rates.

He noted that traders are worried that the Iraqi dinar would continue to fall against the dollar, touching the ceiling of IQD 1,700 for one dollar, as happened at the beginning of 2023, thus contributing to the rise of commodity prices and basic materials.

The trader did not rule out that the recent US sanctions on 14 Iraqi banks and the central bank’s ban on dealing with them in dollars was behind the new exchange crisis, although the central bank is pumping more money into the currency auction.

Last week, the US Treasury imposed sanctions on 14 Iraqi banks in a crackdown on Iran’s dealings in dollars.

The Wall Street Journal quoted US officials as saying they were taking action against the banks after uncovering information that they engaged in money laundering and fraudulent transactions, some of which may have involved sanctioned individuals and raised concerns that Iran could be benefitting from the dealings.

The continuous decline in the exchange rates of the dinar against the dollar prompted Prime Minister Mohammad al-Sudani to meet with the Governor of the Central Bank, Ali al-Alaq, on Sunday, in the presence of financial advisors and the director general of investment in the bank.

According to a statement, al-Sudani was briefed on “clarifications about the most important facilitations provided by the Central Bank, which include allowing small merchants and individuals to finance their imports without the need to establish a company, through government and private banks that have direct relations with correspondent banks.”

Participants in the meeting also emphasized the need to maintain the compensation for citizens and companies who buy dollars at the unofficial rate.

During the meeting, al-Alaq revealed “the bank’s intention to resume selling cash dollars through licensed banks in Nineveh governorate.”



Gold Jumps, on Track for Best Week in Over a Year on Safe-haven Demand

FILE PHOTO: Gold bullions are displayed at GoldSilver Central's office in Singapore June 19, 2017. REUTERS/Edgar Su/File Photo
FILE PHOTO: Gold bullions are displayed at GoldSilver Central's office in Singapore June 19, 2017. REUTERS/Edgar Su/File Photo
TT

Gold Jumps, on Track for Best Week in Over a Year on Safe-haven Demand

FILE PHOTO: Gold bullions are displayed at GoldSilver Central's office in Singapore June 19, 2017. REUTERS/Edgar Su/File Photo
FILE PHOTO: Gold bullions are displayed at GoldSilver Central's office in Singapore June 19, 2017. REUTERS/Edgar Su/File Photo

Gold prices rose over 1% to hit a two-week peak on Friday, heading for the best weekly performance in more than a year, buoyed by safe-haven demand as Russia-Ukraine tensions intensified.

Spot gold jumped 1.3% to $2,703.05 per ounce as of 1245 GMT, hitting its highest since Nov. 8. US gold futures gained 1.1% to $2,705.30.

Bullion rose despite the US dollar hitting a 13-month high, while bitcoin hit a record peak and neared the $100,000 level.

"With both gold and USD (US dollar) rising, it seems that safe-haven demand is lifting both assets," said UBS analyst Giovanni Staunovo.

Ukraine's military said its drones struck four oil refineries, radar stations and other military installations in Russia, Reuters reported.

Gold has gained over 5% so far this week, its best weekly performance since October 2023. Prices have gained around $173 after slipping to a two-month low last week.

"We understand that the price setback has been used by 'Western world' investors under-allocated to gold to build exposure considering the geopolitical risks that are still around. So we continue to expect gold to rise further over the coming months," Staunovo said.

Bullion tends to shine during geopolitical tensions, economic risks, and a low interest rate environment. Markets are pricing in a 59.4% chance of a 25-basis-points cut at the Fed's December meeting, per the CME Fedwatch tool.

However, "if Fed skips or pauses its rate cut in December, that will be negative for gold prices and we could see some pullback," said Soni Kumari, a commodity strategist at ANZ.

The Chicago Federal Reserve president reiterated his support for further US interest rate cuts on Thursday.

On Friday, spot silver rose 1.8% to $31.34 per ounce, platinum eased 0.1% to $960.13 and palladium fell 0.6% to $1,023.55. All three metals were on track for a weekly rise.