| Iraqi Dinar Under Attack posted at Dinar Vets by Sara Johnson Jan 12th 2012, 22:25 _The Iraqi Central Bank (ICB) said it’s under a “currency attack” as traders buy U.S. dollars in daily auctions and resell them on the black market in Syria and Iran, which face hard currency shortages due to sanctions, according to a report from Bloomberg.
Demand for the dollar at the central bank auctions has risen since November to about $200 – $300 million a day, compared with about $160 million per day over the prior 12 months, the deputy central bank governor, Mudher Salih, said in an interview.
He added, “now we are checking the applications to buy dollars from the auctions more closely. We are afraid that some of it may be related to money laundering. We are now under a currency attack because of the regional situation.”
U.S. Treasury Undersecretary David Cohen said on 1st December that Iranians are having trouble accessing foreign currencies due to the plunge in the value of the rial following sanctions
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_Syria, Iran’s regional ally, has also come under greater sanctions from the U.S., Europe and some Arab countries over a violent crackdown on pro-reform protests. A European oil embargo is affecting Syria’s revenues and giving the state far less access to foreign exchange, David Butter, regional head for the Middle East at the Economist Intelligence Unit, said last month.
Rising demand for dollars “is affecting our dollar-sale auction,” Salih said. “This isn’t in the interest of the Iraqi economy and it will suck foreign currency reserves … A lot of money in dollars and also deposits which are supposed to be invested in Iraq are being exchanged to U.S. dollars to fund the trade in neighboring countries.”
Foreign exchange reserves in Iraq, holder of the world’s fifth-largest crude deposits, touched $60 billion this year, the most in its history, he said.
Salih added that the central bank will cut three digits from the currency in 2013, reversing a policy it introduced in the 1980s to address the government’s budget deficit.
The yield on the country’s six-month treasury bills fell 1.1 percentage points to 8.2 percent at the last auction on Dec. 13, according to data compiled by Bloomberg, the lowest yield since August 2010. With yields above 8 percent, Iraq has no plan to issue sovereign bonds this year, the deputy governor said.
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