Why Investing in the Iraqi Dinar Is a Bad Idea — What’s Happening with IQD to USD

KEY HIGHLIGHTS:

• Some individuals, particularly in america, are shopping for the Iraqi dinar as an funding. 
• Most individuals who put money into the Iraqi dinar accomplish that due to theories that the dinar will change into price rather more than it’s immediately by way of a revaluation or “RV”.
• Nonetheless, shopping for the Iraqi dinar could be very unlikely to end in a revenue. We clarify why the Iraqi dinar is a nasty funding. 

The Iraqi Dinar is just not a free floating foreign money

Relating to the Iraqi Dinar, it’s vital to grasp that IQD is just not a free floating foreign money. In different phrases, its worth is just not decided by the overseas alternate market. As an alternative, the Central Financial institution of Iraq controls the alternate fee. For the time being, the official Iraqi Dinar to USD alternate fee is 1,320 IQD per 1 USD, however the precise costs at which persons are shopping for and promoting IQD can fluctuate considerably.
So, not like a foreign money pair comparable to USD/EUR, the place there’s a extremely liquid and environment friendly overseas alternate market, exchanging different currencies for IQD could be very inefficient, particularly outdoors of Iraq itself. In follow, because of this anybody who desires to purchase IQD from a vendor will obtain bodily financial institution notes by mail in alternate for a cost. 
There’s additionally various variation within the quoted purchase and promote charges for USD/IQD, and there’s a distinction in how circulated and uncirculated banknotes are valued. 

A (very) temporary historical past of the Iraqi Dinar

The Iraqi dinar was first launched in 1932, the identical yr by which Britain granted Kingdom of Iraq its independence. Nonetheless, the worth of the Iraqi dinar remained tied to the British pound till 1959, when it was tied to the US greenback as a substitute. The preliminary alternate fee was 1 IQD to 2.8 USD. 
The Gulf Conflict, which lasted between 1990 and 1991, tanked the worth of the Iraqi dinar. By the mid 90s, the alternate fee was 3,000 IQD for 1 USD. Apparently sufficient, Iraqi dinar notes that had been printed earlier than the gulf recognized had been referred to as the Swiss dinar, and continued for use within the Kurdistan area. In the meantime, the federal government of Iraq started issuing decrease high quality notes in massive quantities. These notes had been referred to as Saddam dinars. Swiss dinars banknotes had been consideradbly extra beneficial than Saddam dinars. 
Beforehand, the Iraqi dinar consisted of 1,000 fils, which has similarities to how the US greenback consists of 100 cents. Nonetheless, as a consequence of excessive inflation, fils will not be used anymore and the dinar is the smallest unit of foreign money utilized in Iraq.
One of many the explanation why the Iraqi dinar is just not very beneficial is that oil, which is Iraq’s largest export by far, is priced within the US greenback. As of 2017, petroleum accounted for a whopping 94% of Iraq’s whole exports.

Why are some individuals shopping for the Iraqi Dinar?

Some persons are shopping for the Iraqi Dinar with the expectation that there might be a revaluation or “RV” that might considerably improve the worth of the Iraqi Dinar. Individuals who have invested into the Iraqi Dinar are lively in on-line communities the place they talk about the most recent Iraqi Dinar information and speculate how they may influence the foreign money’s alternate fee sooner or later.
To be clear, Iraqi Dinar revaluations occur sometimes when the Central Financial institution of Iraq decides to alter the official alternate fee. In February of 2023, for instance, the central financial institution set the official alternate fee to 1,320 IQD per 1 USD. Earlier than this revaluation, the speed was set at 1,460 IQD per USD.
Most people who find themselves shopping for the Iraqi Dinar are doing so with the expectation of large earnings. The narratives a couple of important revaluation of the Iraqi Dinar appear to principally originate from conspiracy theories or unfounded hypothesis based mostly on comparatively mundane information occasions related to Iraq. 
One of many principal justifications utilized by those that are shopping for the Iraqi Dinar is that the Iraqi foreign money was valued considerably greater up to now. Earlier than the 1990 Iraqi invasion of Kuwait, the Iraqi Dinar alternate fee towards the US Greenback was 1 IQD to greater than 3 USD. It’s vital to grasp that his alternate fee was set by Saddam Hussein’s autocratic regime and didn’t replicate the precise market demand for the Iraqi Dinar. Some Iraqi Dinar buyers expect that IQD might be “revalued” to the pre-war alternate fee, which is an especially unrealistic state of affairs.

Why investing within the Iraqi Dinar is a nasty concept

Moreover the low possibilities of the Iraqi Dinar rising in worth and the unsure way forward for Iraq, the largest challenge with investing on this foreign money is that it has extraordinarily poor liquidity. As well as Iraqi Dinar sellers are shopping for IQD at a lot decrease charges than they’re promoting it for.

Poor liquidity

For instance, we have now discovered an internet platform the place prospects should buy and promote the Iraqi Dinar. Shopping for 1 million Iraqi Dinars (packaged as 25,000 IQD notes) would value you $1,075. 
In the meantime, in the event you wished to promote 1 million Iraqi Dinars on the identical web site, you’d solely get $625 in return. In different phrases, in the event you used this web site to purchase the Iraqi Dinar, the worth of the Iraqi Dinar towards the US Greenback would wish to extend by 72% simply so you’d be capable to break even. It goes with out saying that this a horrible deal from an funding standpoint.
This isn’t an remoted instance, as all platforms we have now been capable of finding on-line that purchase and promote the Iraqi Dinar are providing equally unhealthy offers.

Chance of redenomination

One other threat you’ll tackle in the event you’re shopping for the Iraqi Dinar is that currencies which have a really low worth are sometimes redenominated. When this occurs, the federal government points a brand new foreign money, and homeowners of the outdated foreign money must alternate it for the brand new foreign money at a predetermined alternate fee.
It’s definitely doable that Iraq will in some unspecified time in the future resolve to redenominate their foreign money. If this occurs, there’s an opportunity that the one strategy to alternate the outdated foreign money to the brand new might be domestically in Iraq. In such a state of affairs, it might be very costly for overseas Iraqi Dinar homeowners to alternate their Iraqi Dinars to the brand new foreign money.

Iraqi Dinar scams

As well as, people who find themselves concerned with shopping for the Iraqi Dinar are sometimes focused by varied scams. In reality, the Washington State Division of Monetary Establishments has revealed an alert warning US residents of Iraqi Dinar scams:

“A number of web sites have lately begun promoting funding alternatives in Iraqi Dinars, the foreign money of Iraq. These web sites are asking the customers to ship a test, wire, cash order, or pay money upon supply of the Dinars. What customers will not be advised is that the Dinars could be redeemed solely in Iraq, as many of the established foreign money alternate homes and banking establishments can’t convert the Dinar to US {dollars}. Since no alternate exists for the Iraqi Dinar, sellers can cost no matter they wish to promote and purchase again the Dinars.”

The underside line

Shopping for the Iraqi Dinar as an funding is extraordinarily dangerous and needs to be averted. There’s a excessive diploma of uncertainty in relation to the longer term improvement of Iraq, and the Iraqi Dinar has very poor liquidity. Sellers who promote IQD will solely purchase it again at drastically decrease charges, which signifies that the worth of the Iraqi Dinar would wish to extend dramatically only for buyers to interrupt even, not to mention make a revenue.
As an alternative of making an attempt to take a position on low-value foreign currency, it’s best to take into account different alternatives such because the inventory market as a substitute. A superb start line to search out shares that could be of curiosity is our article exploring the very best shares to purchase now.