Group of 14 US-Sanctioned Iraqi Banks Warn of ‘Negative Consequences’

Iraqi activists in front of the Central Bank in Baghdad demand economic reforms (EPA)
Iraqi activists in front of the Central Bank in Baghdad demand economic reforms (EPA)
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Group of 14 US-Sanctioned Iraqi Banks Warn of ‘Negative Consequences’

Iraqi activists in front of the Central Bank in Baghdad demand economic reforms (EPA)
Iraqi activists in front of the Central Bank in Baghdad demand economic reforms (EPA)

A group of 14 private Iraqi banks sanctioned by the US Treasury Department warned of "negative consequences" by depriving them of dealing in dollars.

The 14 banks have been banned from undertaking dollar transactions but can continue to use Iraqi dinars and other foreign currencies.

The sanctioned banks said in a joint statement that they deal in dollars with the Central Bank, under the supervision of the US Federal Reserve, and will apply the best auditing standards and investigation of financial transactions.

They said they were ready to challenge the measures and face audits through the Central Bank or an international auditing firm, asserting they'd take full responsibility for any violations if committed.

The statement noted that depriving about a third of Iraqi private banks of dealing in dollars will have negative consequences, not only on the value of the Iraqi dinar against the US dollar, but it will have a significant impact on foreign investments.

They called on the Iraqi government to take all measures to solve this problem and bear the losses they incurred and the banking sector in general.

The United States uncovered information that the Iraqi banks engaged in money laundering and fraudulent transactions, some of which may have involved sanctioned individuals, and raised concerns that Iran could benefit.

An economics professor at al-Basra University, Nabil al-Marsoumi, issued Wednesday data on the number of private banks in Iraq, saying they exceed that of countries such as Britain which has 54 banks only.

Marsoumi reported that the total number of banks in Iraq is 81, including 74 private banks, saying the ratio of public to private banks is the highest in the Middle East, with 43 in Turkey, 41 in Egypt, 31 in Saudi Arabia, 30 in Iran, 26 in Jordan, and 20 in Algeria.

Iraq has 29 Islamic banks, constituting more than a third of the banks in the country, said the expert.

Marsoumi hinted that political groups and parties control most banks.

Meanwhile, dozens demonstrated in front of the Central Bank in Baghdad to protest the sharp decline in the exchange rates of the Iraqi dinar against foreign currencies and chanted against the governor and some political parties and figures, accusing them of manipulating the exchange rates.

The Iraqi dinar reached 1,600 per US dollar in the local markets, compared to an official exchange rate of 1,320 dinars.

Furthermore, independent MP Hadi al-Salami officially requested the dismissal of the governor of the Central Bank, Ali al-Alaq.



Japan's Nikkei Falls, Australia and New Zealand Dollars Tumble amid Israel's Strike on Iran

Arrangement of various world currencies including Chinese Yuan, Japanese Yen, US Dollar, Euro, British Pound, Swiss Franc and Russian Rouble pictured in Warsaw, January 26, 2011. REUTERS/Kacper Pempel
Arrangement of various world currencies including Chinese Yuan, Japanese Yen, US Dollar, Euro, British Pound, Swiss Franc and Russian Rouble pictured in Warsaw, January 26, 2011. REUTERS/Kacper Pempel
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Japan's Nikkei Falls, Australia and New Zealand Dollars Tumble amid Israel's Strike on Iran

Arrangement of various world currencies including Chinese Yuan, Japanese Yen, US Dollar, Euro, British Pound, Swiss Franc and Russian Rouble pictured in Warsaw, January 26, 2011. REUTERS/Kacper Pempel
Arrangement of various world currencies including Chinese Yuan, Japanese Yen, US Dollar, Euro, British Pound, Swiss Franc and Russian Rouble pictured in Warsaw, January 26, 2011. REUTERS/Kacper Pempel

The Australian and New Zealand dollars tumbled on Friday as Israel's strike on Iran hammered global stocks and drove investors into safe-haven assets, with domestic bond yields diving to over a month lows.

The commodity-sensitive currencies often track global risk sentiment and tend to take a hit when equity markets slide.

The Aussie plunged 0.9% to $0.6474, having risen 0.5% overnight to as high as $0.6534. It was already showing signs of fatigue as the currency has been unable to break a key resistance level of $0.6550 overnight even as the greenback slid due to another round of soft data.

For the week, it is down 0.3%.

The kiwi dollar dropped 1% to $0.6011. It gained gaining 0.7% overnight, hitting a high of $0.6071. Support comes in around $0.5990, while resistance is at the multi-month top of $0.6080. For the week, it is down 0.1%.

Israel said early on Friday that it struck Iran. Oil prices jumped over 6%, Wall Street futures dropped over 1%, while safe-haven currencies like the Japanese yen and Swiss franc rose.

Local bonds also rallied. Australia's ten-year government bond yields slid 11 basis points to 4.133%, the lowest since May 1, while New Zealand's ten-year government bond yields dived 8 bps to a six-week low of 4.529%.

Sean Callow, a senior analyst at ITC Markets, said the trend for the Aussie is still up given the pressure on the US dollar from a sluggish US economy and investor unease over the U. policy outlook.

"Investors are likely to expect that Israel's strikes will be contained to a relatively short period, not something that will dictate market direction multi-week," he said.

Also, Japan's Nikkei share average fell on Friday, mirroring moves in US stock futures, oil and other stock markets on news that Israel had conducted a military strike on Iran.

As of 0106 GMT, the Nikkei was down 1.5% at 37,584.47.

The broader Topix fell 1.28% to 2,7473.9.

"The market was selling stocks on caution for geopolitical risks, but the news was not driving a fire sale because investors still wanted to monitor the development of the attacks," said Naoki Fujiwara, a senior fund manager at Shinkin Asset Management.

Chip-making equipment maker Tokyo Electron fell 5.5% to drag the Nikkei the most. Uniqlo-brand owner Fast Retailing lost 2.1%.

Exporters fell as the yen strengthened, with Toyota Motor and Nissan Motor falling 2.75% and 1.5%, respectively.

All but three of the Tokyo Stock Exchange's 33 industry sub-indexes fell.

Energy sectors rose as oil prices jumped, with oil explorers and refiners gaining 3.6% and 2.2%, respectively.

The utility sector rose 0.7%.