WHAT IS THE RELATIONSHIP OF CENTRAL SALES OF CURRENCY WITH THE EXCHANGE RATE OF THE DOLLAR? AN EXPERT CLARIFIES AND ACCUSES OF “BLACK MONEY TRANSFERS”
The Central Bank of Iraq’s sales in the hard currency auction witnessed a fluctuation between high and low, amid a state of panic in the local markets, following the continued rise in the exchange rates of the dollar, and the decline in the value of the Iraqi dinar.
Today, Thursday (August 17, 2023), the Central Bank of Iraq’s sales in the “dollar” currency auction amounted to about 192 million dollars, while yesterday, Wednesday, it amounted to (193,716,083) million, and last Tuesday it reached (183,890,982) million, and last Monday the bank sold (201,236,671) million. , which indicates a clear increase and decrease in sales.
Central sales and exchange rates
Today, Thursday (August 17, 2023), the expert in financial and banking affairs, Nasser Al-Kinani, explains the impact of the decrease and increase in the Central Bank’s sales on the dollar prices in the local market.
Al-Kinani told “Baghdad Today” that “the decline and rise in sales of the central bank certainly has a significant and direct impact on the exchange rate of the dollar in the local market,” adding, “But this decrease or rise does not affect if it is for a few days, because it depends on continuity.” rise or fall.”
The parallel market and black transfers
And the expert in financial affairs indicates that, “The problem of the high exchange rate of the dollar in the parallel market has nothing to do with the issue of the central bank’s daily sales percentage, but rather this matter has to do with the continuation of sending black remittances outside Iraq.”
And he stresses that “without stopping these transfers and finding solutions to this problem, it is not possible to control the exchange rate of the dollar in the parallel market.”
And experts in the financial affairs point out that the banks affiliated with the political parties are behind the dollar crisis in Iraq, stressing that they are working “black transfers” and some illegal banking moves.
Experts explain that the “political protection” of some of these banks is a reason why they are not held accountable by the competent Iraqi authorities, noting that US sanctions are imposed on them, to prevent “misuse of the dollar . “
And in the event that these banks continue to operate outside international standards, this means, according to the specialists, “the imposition of new US sanctions on new banks during the next stage.”
Earlier, Prime Minister Muhammad Shia al-Sudani revealed the details of the dollar crisis, which he described as a “battle”, announcing at the same time the arrest of a network of “major speculators” linked to speculators in the Kurdistan region .
Japan's second-quarter GDP for 2023 has surged due to robust exports and a significant inflow of tourists, indicating that the country is emerging from its Covid slump. While these factors contribute to the impressive growth, concerns arise from declining imports and reduced private consumption, casting a pall on the optimistic figurers.
Superficial Growth in GDP?
According to BBC, the world’s third largest economy saw its GDP grow by an annualized rate of 6% in the second quarter of 2023, surpassing expectations. The growth marked the most substantial increase in nearly three years and was double the economist's projections.
The explosive growth within the country was fueled by an impressive export sector. However, the rise in exports was mainly backed by a weaker Yen, making Japanese goods cheaper for global consumers. Japan's currency has experienced a significant decline against major counterparts in recent months, plummeting more than 10% against the US dollar this year. A weakened currency also saw import levels falling about 4.3% from the previous quarter.
Japan’s economy was also helped by inbound tourists, which saw a boost after the government lifted its border restrictions at the end of April. By June, the country's national tourism authority reported that foreign visitor numbers had rebounded to over 70% of the pre-pandemic levels. Anticipated spending by tourists is poised to provide a substantial economic lift to Japan starting this month.
However, despite the remarkable growth, the government still faces challenges from falling private consumption levels, which make up more than 50% of the Japanese economy. In addition to the decline in export levels during July, these factors continue to raise concerns about the true extent of the economy's recovery.
Falling Domestic Consumption
Sayuri Shirai, an economics professor at Keio University and a former Bank of Japan board member, as quoted in the New York Times, pointed out that both households and corporations are cutting back on domestic spending, indicating challenges.
Per a New York Times article, domestic spending in Japan has not kept up with the strong export data. Domestic spending has decreased due to the yen's weakness. Japan relies heavily on imports for essentials like food and energy, and the yen's long-term decline against the dollar has raised costs, causing inflation levels not seen in decades. This currency depreciation is primarily due to Japan's persistently low interest rates in contract with the rate increases in the United States and other nations.
Exports Fell in July
According to Reuters, after witnessing growth in the second quarter, Japan's exports experienced the first decline in July after almost two and a half years. The main culprit was less demand for items such as light oil and chip-making equipment. This highlights the concerns regarding a global recession due to a weakening Chinese economy.
Recent data, released by the Ministry of Finance on Aug 17, show the 0.3% year-over-year fall witnessed in the month of July which, however, was less than the projected fall of 0.8% in exports by economists polled by Reuters.
Japanese officials are depending on exports to strengthen the economy and offset weakened private spending caused by higher prices. Yet, worries arise due to a potential sharper worldwide slowdown and China's struggling growth.
Policy Shift to Dramatically Change the Scenario?
According to a Reuters article, around 40% of Japanese companies anticipate the recent policy shift by the central bank will affect their fundraising, revealing their sensitivity to policy changes after years of significant easing.
The possibility of the Bank of Japan moving away from its super-loose monetary approach has stirred concerns about increased borrowing expenses in the third-largest global economy. Additionally, if long-term interest rates reach 1%, a level the central bank currently permits for 10-year bond yields, roughly two-thirds of businesses expect an impact on their fundraising.
ETFs in Focus
Those who seek to navigate Japan's economic landscape effectively, should track the below-mentioned ETFs closely.
iShares MSCI Japan ETF seeks to track the performance of MSCI Japan Index with a basket of 237 securities. Approximately 78.26% of the fund's assets are allocated to the large-cap segment, contributing to reduced volatility in relation to the economy. EWJ has amassed an asset base of $13.36 billion and charges an annual fee of 0.50%.
iShares MSCI Japan ETF has major allocations to the industrial sector with a share of 23.26%. The fund has a Zacks ETF Rank #3 (Hold) and a Medium risk outlook.
JPMorgan BetaBuilders Japan ETF seeks to track the performance of the Morningstar Japan Target Market Exposure Index with a basket of 267 securities. About 75.52% of the fund's assets are attributed to the large-cap category, which serves to mitigate volatility within the economic context. BBJP has gathered an asset base of $8.67 billion and charges an annual fee of 0.19%.
JPMorgan BetaBuilders Japan ETF has major allocations to the industrial and consumer discretionary sectors, with a share of 26.2% and 23.3%, respectively. The fund has a Zacks ETF Rank #3.
The WisdomTree Japan Hedged Equity Fund aims to offer exposure to the Japanese equity market while also mitigating the impact of fluctuations between the U.S. dollar and the yen. The fund has a basket of 435 securities and an asset base of $2.76 billion. DXJ charges an annual fee of 0.48%.
WisdomTree Japan Hedged Equity Fund has parked about 72.22% of its asset in large-cap equities, with a major allocation in the industrial sector (27.04%). The fund has a Zacks ETF Rank #3 and a Medium risk outlook.
Franklin FTSE Japan ETF seeks to track the performance of the FTSE Japan RIC Capped Index with a basket of 515 securities. BBJP has gathered an asset base of $1.55 billion and charges an annual fee of 0.09%.
About 67.99% of the fund's assets are attributed to the large-cap category, with a major allocation of 23.61% to the industrial sector. The fund has a Zacks ETF Rank #3.
MarkZ Disclaimer: Please consider everything on this call as my opinion. People who take notes do not catch everything and its best to watch the video so that you get everything in context. Be sure to consult a professional for any financial decisions
Member: Good evening Mark, Mods and members. Blessings to all.
Member: Happy Almost Weekend to everyone……
MZ: ”Iraq possesses 132 tons of gold reserves” They are continuing to stock up. I believe they are way closer than they are telling us.
Member: Iraq bought more US bonds today
MZ: Their stocking up on US bonds could give them more leverage.. .If they dumped those along with Operation Sandman this gives them leverage to make the Us let them go. Or they dump these bonds at a discount and the Us crashes …..or maybe they are increasing their negotiating position…..in order to ask the US to let them go.
MZ: there is a huge amount of clean up going on right now…
Member: Frank 26 wore oragne last night. means implementation
Member: What is Operation Sandman?
Member: That is when over a hundred of countries say they will dump their US treasury bonds all at once to crash the fiat system…….i was hoping it would have already happened.
Member: (From Dinar Guru) Intel Guru Frank26 [Iraq boots-on-the-ground report] FIREFLY: They are showing us on television how they are arresting the corrupt in...high up positions. We are seeing the former Oil Minister and several others that are being arrested and they still have warrants out for the former prime minister... FRANK: There's a lot of cleanup going on in your country and you see it...
Member: Evergrande bankruptcy should crash the system. So I think we’re close.
Member: Evergrande has been about to collapse for a year now…..they keep propping it up
Member: I believe things will start to happen with BRICS next week.
Member: Dr Scott says it's coming. buckle up butter cups. I think he's in the know.
Member: Nader will be traveling to Iraq this month. He will stay in touch with us when he is in Iraq.
Member: Hang In There People. We Are Closer Than We Know. "Quitters Never Win & Winners Never Quit"
Markz will be on rumble on SATURDAYS ONLY so he can speak his mind. You will find him on YouTube during the week.
SATURDAYS GO TO: Odysee at: https://odysee.com/@theoriginalmarkz:e OR THE RUMBLE CHANNEL: https://rumble.com/user/theoriginalmarkz
Note from PDK: Please listen to the replay for all the details and entire stream….I do not transcribe political opinions, divisive social commentary,medical opinions or many guests on this stream……just RV/currency related topics.
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About the United States Dollar / Indonesian Rupiah currency rate forecast
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About the United States Dollar / Philippine Peso currency rate forecast
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ERBIL— Iraq's Central Bank governor on Thursday reaffirmed that the country is making progress in controlling and stabilizing the value of its currency (IQD) against the US dollar.
"The US's request to regulate the export of USD is not aimed at limiting it, but rather at implementing anti-money laundering regulations and preventing the transfer of funds to terrorist organizations," Central Bank Director Ali Allaq told reporters.
Allaq pointed out that the new system is processing foreign transfers at a rapid pace, which ensures a balance between the market and the demand for US dollars.
"The new framework aims to guard the banking and financial system from unlawful activities, money laundering and financing terrorists," the governor added.
US officials have been pressing Iraq to strengthen its banking controls in order to prevent the flow of funds to terrorist organizations and other illicit activities.
The value of the nation's currency has undergone a dramatic fluctuation recently as Iraqi banks endeavored to comply with SWIFT, the global electronic payment transfer network.
Central Bank Announces Measures to Strengthen Iraqi Dinar
ERBIL — The Central Bank of Iraq (CBI) has identified four measures aimed at supporting the strength of the Iraqi dinar, according to the assistant general manager of the investment department in the bank, Mohammed Younis.
In an interview with state media Iraqi News Agency (INA), Younis explained that the measures are designed to enhance external transfer and financing of trade, study and other areas.
Younes noted that the effects of these measures have already begun to show, with the US dollar declining continuously against the dinar. He pointed out that the CBI's actions have contributed to reducing the difference between the official and parallel exchange rates.
However, the official also added that Iraq's high demand for the dollar, as an importer of goods, can sometimes make it stronger against the dinar. To address this issue, he emphasized the need for a comprehensive effort to support the dinar through measures such as supporting the local product, reducing import operations, controlling markets, and controlling border crossings.
Younis also acknowledged that some departments in Iraq have faced problems because their contracts are in dollars. To resolve this issue, the CBI and the federal government have started to take steps to address it. He highlighted that Iraq possesses more than 130 tons of gold.
US Treasury reports Iraq's bond holdings surge to $33 billion after four-month decline
Shafaq News/ Iraq's holdings of US Treasury bonds have surged to approximately $33 billion, signaling a notable recovery after experiencing four consecutive months of decline, according to a report released by the US Treasury Department on Thursday.
The latest figures from the Treasury reveal that Iraq's ownership of US Treasury bonds witnessed a robust $300 million increase in June 2023, rising from the previous month's total of $32.7 billion. This represents a growth rate of 3.12% compared to the same period in the previous year, during which Iraq's bond holdings amounted to $32 billion.
Amongst Arab nations, Saudi Arabia emerges as the frontrunner with the largest bond holdings at $108.1 billion, followed by the UAE with $65.2 billion and Kuwait with $40.6 billion. Iraq secures the fourth position, while Oman rounds out the top five with bond holdings totaling $7.061 billion.
On a global scale, Japan is the largest holder of US bonds, boasting an impressive $1.105 trillion, trailed by China with $835.4 billion, the United Kingdom with $672.3 billion, and Belgium with $332.4 billion.
The cumulative value of US Treasury bonds for June reaches approximately $7.563 trillion, representing a noteworthy increase of 1.97% compared to the same month in the preceding year when the total stood at $7.417 billion. Furthermore, the growth continues on a monthly basis, registering an uptick of about 0.56% from $7.521 trillion recorded in May 2023.
Expert says economic ties with sanctioned countries causes forex turbulences
Shafaq News/ Financial expert, Abdul Rahman al-Mushahidani, on Wednesday attributed the surge in the U.S. dollar's exchange rate against the Iraqi dinar to trade ties with countries facing international sanctions.
This comes despite the Central Bank of Iraq's attempts to impose stringent regulations on the American dollar supply.
"The online platform has essentially rendered financial transfer processes transparent, stating both the sender and the recipient bank, a marked shift from previous circumstances where exchange firms dominated external transfers unmonitored," Al-Mushahidani told Shafaq News Agency.
"Annually, Iraq imports between 8 to 10 billion dollars' worth of goods from Iran, necessitating the provision of 21 to 25 million dollars daily for merchants," he said, "Parvezkhan border crossing alone witnesses the export of about 3 million dollars daily. Notably, traders procure these dollars from the parallel market, bypassing the central bank's electronic platform."
"The fundamental issue is Iraq's trade ties with countries blacklisted and sanctioned by the United States. Such trade, approximately accounting for a quarter of Iraq's total, is primarily financed through the parallel market."
"The state could address the parallel market dilemma by devising a mechanism in collaboration with U.S. authorities to officially finance trade with the prohibited countries," he suggested.
Iraq has made strides implementing U.S. dollar supply restrictions targeting Iran but faces an uphill battle with a banking system unaccustomed to strict oversight and persistent currency smugglers, central bank governor Ali al-Allaq told Reuters.
"It is really a battle, because the people benefiting from this situation and those harmed (by the new measures) will try in various ways to continue their illegal activities," Allaq said in an interview with Reuters.
Allaq did not mention Iran by name and said he did not have data on how much of Iraq's dollars been smuggled to Iran or other neighbouring countries, including Turkey and Syria, before the United States tightened regulations in November.
The U.S. measures that aim to enforce sanctions on Iran are a sensitive matter in a country that has often been a front line in the rivalry between Washington and Tehran.
Iraq's government is reliant on Washington's continued goodwill to ensure oil revenues and finances do not face U.S. censure, but it came to power with the support of powerful, Tehran-backed groups and so cannot afford to alienate Iran.
The latter groups have accused the U.S. of meddling in Iraq's internal affairs and creating a currency crisis, as businesses either struggling or unwilling to abide by the new measures sourced dollars from exchange shops, driving down the value of the Iraqi dinar.
Iraq has more than $100 billion dollars in reserves, Allaq said, but could not freely intervene in the market to bring the rate down due to the restrictions.
Last month, the U.S. Treasury Department and the Fed barred 14 Iraqi banks from conducting dollar transactions as part of a wider crackdown on dollar smuggling to Iran via the Iraqi banking system, U.S. officials said.
Allaq said that action related to transfers from 2022, before a new platform that aimed to improve transparency went live. He said the central bank was undertaking a review of the banking sector and introducing new regulations that he said would likely see some banks close.
"It would be very normal in the coming period to see a reduction in the (number of private banks)," he said.
"There are always side-effects, but at the same time we have a responsibility to protect the country's interests by trying to find the necessary means for monitoring and oversight so as not to expose the country to any issues on this front," he said.
'TRANSFORMATION'
The U.S. measures have targeted Iraq's so-called dollar auction, where the central bank requests dollars from the U.S. Federal Reserve before selling them to commercial banks, which in turn sell the funds to businesses in the highly import-dependent economy.
U.S. and Iraqi officials have said the auction allowed large sums of money to be illegitimately acquired by groups who would provide fake invoices and then either transfer or physically smuggle the funds to neighbouring countries, chiefly Iran.
A feature of a highly informal economy, the system was also used by thousands of small businesses that are not registered with the state, Allaq said, a widespread phenomenon in Iraq that allows them to dodge taxes and customs fees.
Since January the central bank has asked banks to provide detailed information on senders and recipients of transfers via an online platform.
When companies began trying to use the platform in January, less than 20% of requests were approved by U.S authorities, Allaq said. That number had now risen to around 85 percent, signalling growing ease with the new regulations, he said.
Allaq said that tighter regulations along with government plans to promote digital payment were forcing a wider shift in the Iraq economy in a country where cash remains king and the majority of adults do not have bank accounts.
"It is not just an electronic platform, it will lead to a total reorganisation of trade and the movement of money, and control on a lot of avenues for suspicious activity."
