Iraq’s Central Bank says it will not allow the Iraqi dinar to depreciate and has been selling hundreds of millions of dollars to keep the currency stable, according to a report from Azzaman.
The dinar weakened in December, prompting the bank to sell dollars in a bid to withdraw cash from Iraqi markets.
The bank did not say what caused the dinar to plummet to “lows it had not seen for years”, but officials privately say the plunge might have been due to political uncertainty in the region.
Mudher Saleh, Central Bank’s deputy governor, said there were no sound economic reasons for the currency’s weakening, but speculated that it might be the economic difficulties Iraq’s neighbours are facing, particularly Syria and Iran.
The bank coffers are said to be brimming with hard cash from oil sales.
Saleh said the bank would not let the dinar fall and in one day in December last year it sold $200 million on the open market to squeeze liquidity.
“We withdrew in one single day about one quarter of a trillion dinars, thereby brining stability to the currency,” Saleh said.
He said Iraqi traders and industrialists have turned into middlemen for these countries, which has led to a substantial growth in demand for hard currency.