Iraqi Dinar (IQD)

What Is the Iraqi Dinar (IQD)?

IQD is the currency code for the Iraqi dinar, the currency of Iraq. The Central Bank of Iraq circles the Iraqi dinar, which is comprised of 1,000 fils. Due to inflation, fils are not generally involved and dinars are the littlest unit of currency in circulation.

As of Q2 2021, the IQD is pegged at a rate of US $1 = 1,450 IQD, albeit the genuine exchange rate might change somewhat around that peg.

Figuring out the Iraqi Dinar (IQD)

The dinar, first acquainted in 1932 with supplant the Indian rupee, had a conversion rate of one dinar for 11 rupees. The dinar was pegged to the British pound (GBP) until 1959, when it was pegged to the [U.S. dollar](/usd-US dollar) (USD). The exchange rate remained relatively stable until the Gulf War in the mid 1990s.

The dinar was worth more than $3 in U.S. currency prior to the 1990 to 1991 Gulf War. Currency printed before the Gulf War became known as the Swiss dinar. After the war, the government printed new currency that was inferior in quality, due to the lack of printing technology because of war-related sanctions. This quickly devalued the currency to an average of 1,950 dinar for every USD by 2003. The old Swiss notes actually coursed in certain districts of the country.

Starting in 2003, new notes were by and by issued, this time better quality, with the goal that the whole country could utilize one currency. Old notes were exchanged for new ones on a balanced basis, while Swiss notes were exchanged at a rate of one Swiss note for 150 new notes. The exchange rate for the USD/IQD was set at 1,190 until December 2020, so, all in all Iraq's Central Bank announced it would devalue the country's currency by over 20% in response to a serious liquidity crisis brought on by low oil prices, a measure that has started public shock as the government battles to cover its expenses. As of December 2020, the peg is set at 1:1,450.

The dinar has little use outside of Iraq in light of the fact that the country's fundamental export, oil, is priced in US dollars. Notwithstanding this, there are various scams that try to captivate individuals to buy dinars with expectations of eventual price appreciation. Numerous agencies and publications warn investors against investing in IQD scams.

Commonly, brokers selling IQD cash will charge a 25% to 30% premium over the official exchange rate. Those that buy it accordingly face large losses promptly after purchasing it. Selling it is additionally troublesome since there is for all intents and purposes no market for it outside of Iraq. The brokers ordinarily offer 30% under the official exchange rate assuming that somebody wishes to sell them dinars. These transaction costs could dissolve 40% to 60% of capital invested in the event that the official exchange rate doesn't change.

As per World Bank data, Iraq experienced annual inflation of 0.4% in 2018 and - 0.2% in 2019. Gross domestic product (GDP) dropped to - 1.2% in 2018, up to 4.4% in 2019, and down to - 10.4% in 2020.

Scams of Investing in the Iraqi Dinar

Genuine forex trading in the USD/IQD currency pair is practically nonexistent. Major banks don't offer Iraqi dinars for trade. Iraqi dinars are just accessible for purchase or sale through select money exchangers, who might possibly be legally registered. As talked about, these exchangers or brokers regularly charge fees of 30% or more, which is considered into the exchange rate offered. Consequently buying and selling IQD could bring about losses of half without the exchange rate moving.

Redenomination occurs in instances of high inflation, where old high-value notes convert to new more modest value notes by removing zeros to increase the buying power of the currency. There have been bits of gossip about plans to redenominate the dinar yet nothing has come about because of these reports. Redenomination without revaluation wouldn't increase the value of the IQD. Those holding old notes would likely just need to swap for new ones, probable bringing about extra fees if outside Iraq.

The determined adjustment made to a country's official exchange rate relative to a picked baseline, like gold or the USD, is known as a revaluation.

Instance of Buying and Selling Iraqi Dinar Outside of Iraq

There is no utilization for dinar outside of Iraq, in this way buying it commonly means buying cash from a broker and putting away it with them or taking physical delivery.

The official exchange rate is 1,459 dinars for each USD as of August 2021. It would cost about $685.51 to buy 1,000,000 dinars going on like this (1 million/1,459). Assuming buying from an online broker, they might offer 1,000,000 dinars for $857. That is about a 25% premium over the official rate. Tack on delivery fees and the premium could be even more.

Accept the rate of the USD/IQD doesn't change. On the off chance that our investor chooses to sell their 1,000,000 dinars, there is reasonable no place to sell with the exception of back to a broker, since there is little demand for the currency outside Iraq. A broker might offer $568.97 to buy back the dinars. This is 17% not exactly the official exchange rate value, and 33.5% not exactly the $685 paid for the dinars. This without the genuine exchange rate moving. An investor could lose over 30% just from buying and selling the currency through brokers who work a premium into each transaction.

Highlights

• IQD is the currency code for the Iraqi dinar, the currency of Iraq.
• Iraq's primary export, oil, is priced in US dollars, and that means there is little demand for the dinar around the world.
• The currency has been utilized to advance various scams, and investors are some of the time allured to pay large premiums for the currency in the expectations it will one day be revalued higher.