DINAR REVALUATION UPDATE, 22 AUGUST

 DINAR REVALUATION 

ANALYSIS OF WHAT FIREFLY SAID:

FIREFLY:  Saleh was talking about the floats and he was also talking to us about fixed rates.  He's saying no decisions have been made.  They talked about the pros and the cons of each one of these options.  Then the CBI came out and said in the coming days we will make actions to lower the dollar exchange rate. https://dinarevaluation.blogspot.com/2024/08/latest-from-firelfy-22-august.html

---It sounds like Saleh was discussing the different options for managing the exchange rate of the dollar, comparing floats and fixed rates. He mentioned that no final decisions have been made yet and that the Central Bank of Iraq (CBI) is planning to take actions to lower the dollar exchange rate soon.

Here's a brief overview of the terms involved:

1. Floats: In a floating exchange rate system, the value of the currency is determined by the market forces of supply and demand relative to other currencies. It can fluctuate regularly based on economic conditions, geopolitical events, and other factors.

2. Fixed Rates: A fixed exchange rate system ties the currency's value to another major currency (like the US dollar) or a basket of currencies. The central bank intervenes in the foreign exchange market to maintain the currency’s value within a narrow band.

Pros and Cons:

• Floats:

  • Pros: Automatically adjusts to economic conditions; less need for central bank intervention.
  • Cons: Can be volatile; subject to market speculation.

• Fixed Rates:

  • Pros: Provides stability and predictability in international prices; can help control inflation.
  • Cons: Requires large reserves of foreign currency to maintain the peg; can lead to misalignment with market conditions.

The CBI’s statement about actions to lower the dollar exchange rate suggests they might be leaning towards adjusting or managing the rate to achieve a specific economic goal, such as controlling inflation or stabilizing the economy. Both objectives need to be achieved to revalue the Iraqi dinar according to Shabibi's plan.

The choice between a floating or fixed rate system will depend on their broader economic strategy and objectives.