Central Bank of Iraq and the Iraqi Dinar's Forex Market Presence
The Central Bank of Iraq's (CBI) restrictions on the exchange and trading of the Iraqi dinar (IQD) have been significant factors in the currency's absence from the Forex market. These limitations have made it challenging for Forex traders to access and trade the IQD, affecting its liquidity and appeal as an investment option. As of August 30, 2024, the CBI's policies toward the IQD remain restrictive, impacting its potential for inclusion in the global foreign exchange markets.
Iraq's Shift in Currency Policies
In a recent development, Iraq has announced plans to restrict all internal trade to the Iraqi dinar from the following year. This policy is designed to help control the black-market exchange rate and reduce the country's dependence on the US dollar. The Central Bank governor, Ali Al Alaq, has stated that the new measures align with international standards and anti-laundering laws.
Impact of US Regulations
US regulations governing international money transfers have played a significant role in Iraq's decision to reevaluate its currency policies. Since November 2022, stringent US measures have been in place to curb the diversion of US dollars to Iran, Syria, and Lebanon via Iraq's Central Bank foreign currency auction. These actions have contributed to the fluctuating black market exchange rate and increased demand for dollars in Iraq. The US Federal Reserve has also blacklisted several Iraqi banks suspected of money laundering and suspicious transactions.
Iraq's Response to Currency Instability
In response to the currency instability, Iraq has taken steps to strengthen its financial system and counter illicit finance. The CBI has increased overseas dollar transactions through the official global SWIFT system, which has resulted in a significant rise in regulated transactions. The central bank's vice governor, Ammar Khalaf, reported that transactions through the electronic platform have grown from 200 million, which reflects the size of Iraq's economy.
Money Changers' Strike
Iraqi money changers have responded to these restrictions by initiating a nationwide strike earlier this month, protesting the central bank's policies. The Coordination Committee for Money Exchange demanded that the central bank rescind limitations on foreign currency trading and provide greater industry support.
Outlook for IQD's Forex Market Presence
The future of the IQD in the Forex market remains uncertain. The CBI's ongoing efforts to control the black market and stabilize the dinar's value may eventually lead to a change in restrictions and a potential increase in the currency's liquidity. However, as of August 30, 2024, no official announcements have been made regarding any changes to the current restrictions on IQD trading in the Forex market.
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