Enorrste / Tlar & Dinar Alert Member Dialogue

This Post is a continued post: For reference check this LINK

Banking sources: Outlook down the dollar against the Iraqi dinar in the coming days

Thursday, 25/07/2013 | Source:

Parliamentary sources confirmed, Tuesday, that the rate of the Iraqi dinar will rise versus the dollar in the coming days in light of steps taken by the Central Bank of Iraq. According to a source in the Iraqi Central Bank “parliamentarians, officials and economists praised the reduction in the exchange rate of the dollar and the high price of the Iraqi dinar in the light of steps taken by the Central Bank and banks in this area, which is reflected in this activity”.

The source stressed that “this is expected to continue to decline for the dollar and that the rate of the Iraqi dinar has improved more over the next few days according to the indications of the Central Bank and the market.”
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Read More Link On Right

  The report recommended that the International Monetary Fund, Iraq the pace of structural reform to boost growth and job creation in the private sector, and the need to continue the rational management of the foreign reserves of the Central Bank of Iraq and the Development Fund for Iraq.

The Bank had earlier said (19 July), that Iraqi banks Association agreed with the Central Bank reduced the cash dollar exchange rate instead of the dinar to 1180-1184 Iraqi dinar as of last Sunday, with the expectation that you responded to this initiative, all banks, he indicated that this reduction will bring great benefit to the citizen. LINK

    Enorrste at July 24, 2013 at 8:36 PM:  Once again I agree with KAP entirely.  This stabilization move on the part of the CBI will get it to 1166 shortly and it will then hover there, stable as a rock, until the announcement of the free float.

    Incidentally, the word “pip” is the wrong one to use here.  We should be using the word “point”, since a “pip” is 1/100th of a point.  FYI    Enorrste

BNA13:  Enorrste, I assume you are talking about the MR.

I disagree. The MR will break 1200, heading up to 1190-1185. On the way up, the Official Rate will move to around 1160 or so. As the MR continues to climb, so will the OR.

As these two rates climb together, the 2% differential (anything above that is called MCP, Multiple Currency Practice, by the IMF) will be maintained. I think the OR will stablize at 1095 for awhile before it hits the final stretch to 1000:1 by mid-October.

The de facto peg will be maintained via the auctions. One thing is sure. We’ll all see what happens.

Enorrste:  Interesting thoughts, BNA13.  However, there is a problem in your logic if you buy what KAP and I have been predicting thus far. 

First, the official rate has stayed at 1166 for a few years now.  We predict that the CBI will announce a freely floating rate.  In that scenario, then, I cannot see the CBI having a rate of 1160 as you state.

 That would indicate a “managed float” rather than a “free float.”  Therefore the CBI will not be controlling the rate itself, but only the pace of change in the rate. 

I do agree with you that the two will go up together, however.  I suspect that you weren’t trying to say that the CBI was going to change the Official Rate unilaterally in a jerky fashion, but rather that it would allow it to follow the market rate. 

I’d be interested to hear your reasoning on your belief that it will hover at about 1095 for awhile before it moves to 1000:1 by mid-October.  That is a rather direct prediction.  Anything to back it up?   Enorrste

U Mad Bro?:  Tlar, is it your opinion that we will see Iraq move to article VIII sometime in next 30 days?

Tlar:  U mad bro, I think Turki will have to do something very positive to the currency in order to keep these banks from straying from this plan. Let’s assume for a second that this plan that is targeting reducing the street rate is successful in a week.

Turki must do two things to insure that the banks sacrificial effort is first rewarded, then no longer necessary. Without a reward, the banks won’t hold to this plan.

Without an at least some semblance of a termination of this sacrifice, the banks won’t hold.

 In other words the banks can not continue to sell the dollar at 1179 because there is not only no profit in it for them, but they actually incur cost. The lines of people that have been waiting to be served everyday require bank employees that cost salaries.

These bank employees become instantly a burden because they make no money while they work all day. They are unproductive. It is the hope of the CBI that these lines will diminish as the rate stabilizes.

We have heard that there is less demand for the dollar but that is not born out by the sale of cash dollars at the auctions as of yet.

So while the thought is basically sound in this plan, if the plan starts to disintegrate because it either takes to long or the banks begin to believe that they will not see the carrot anytime soon, the plan again won’t hold.

 As to your question on IMF Article VIII. I think there is ample proof that these banks are not unilaterally making this sacrifice. In other words there most likely is a reward for their “selfless act” on the table but just not public announced.

 If we look at what the bank could possibly bate these independent banks with that might make it worth their while to eat their own body fat, the list is short.

I see RV and IMF Article VIII happening at the same time followed by either a free float or a managed float. Most importantly though, there must be a change in the currency because these banks would never make this kind of a sacrifice just to watch the currency start to creep up.

That’s a formula for disaster in my opinion because again, the banks can’t do this for long. If they break the plan no matter why at any point, the CBI will have to regroup and start all over again.

Changing the value significantly, changes the conditions on the field. One it should immediately stop dollarization in its tracts and actually reverse the trend making the sales of dollars a very small part of the banks profits.

I think it was stated in an article or someone on here said, “there is a complete shift in policy going on.” I too see that but I see more important that this plan is the vehicle to get there quickly.

Bringing the rates together is but one step of this plan. Step to is the reward and it the first part works, Turki better provide the second.

Once the reward is instituted the massive amount of dollarization will disappear and actually reverse.

That’s why I believe Turki will delete the zeros, institute Article VIII, and immediately reverse the course they have been on. He must do it in a tolerable period of time for these independent banks or their sacrifice will have been in vain..

Paxx:     I don’t see the point of stabilizing the current rate,brining the street rate together with the official rate, rate stabilization in an artificial market, a 4 pip reduction or any of that stuff. 

Once they go international, none of those things will have mattered. Once they go international, de-dollerize and have more IQD (low denoms) on the street, it will increase the velocity, liquidity, and value of IQD. It won’t matter if they could stabilize any of this closed monetary BS.

Once they go international they will be dealing with bunch of new monetary, banking, economic problems, but good problems and ones that take place in an international reality, not some artificial limbo they are in. So IMO all they need to do is go from article 14 to article 8 and take this MOTHER international and let it float or RV and float. They just need to DO IT.