What is the Iraqi Dinar (IQD)?

What is the Iraqi Dinar (IQD)?

IQD is the currency code for the Iraqi dinar, the currency of Iraq. The Central Bank of Iraq circulates the Iraqi dinar, which is made up of 1,000 fils. Due to inflation, fils are no longer used and dinars are the smallest unit of currency in circulation.

As of Q2 2021, the IQD is pegged at a rate of US $1 = 1,450 IQD, although the actual exchange rate may fluctuate slightly around that peg.

History of the Iraqi Dinar

The Iraqi dinar was put into circulation in 1932 and replaced the Indian rupee, which was the national currency since the British occupation in World War I. The Iraqi dinar remained tied to the British pound until 1959, after which it was pegged to the United States dollar at a rate of 1 IQD = 2.80 USD, without a change in value.

Iraqi dinar did not follow the devaluation of the US currency in 1971 and 1973 and increased to 3.38 USD before the value of the IQD reduced to 3.22 USD due to a 5% devaluation. The rate continued until the Gulf War, though the black-market rate was about six times higher in late 1989.

Following the 1991 Gulf War, subject to UN sanctions, the formerly used Swiss printing method became unavailable. Hence, new and lower quality notes were made, while the previously created notes came to be known as the Swiss dinar and continued to be used in Iraq’s Kurdistan Region. The sanctions enforced by the global community and the United States, together with excessive printing by the government, rapidly devalued the new dinar notes.

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At the end of 1995, 1 USD was priced at 3,000 IQD. New notes were released again in 2003; however, at that time, they were of higher quality so that the whole country could use a single currency. While the old Iraqi dinars were exchanged with new Iraqi dinar notes on a one-to-one basis, the Swiss notes were replaced at a rate of 150 new notes for one Swiss note.

Scams of Investing in the Iraqi Dinar

Legitimate forex trading in the USD/IQD currency pair is virtually nonexistent. Major banks don’t offer Iraqi dinars for trade. Iraqi dinars are only available for purchase or sale through select money exchangers, who may or may not be legally registered. As discussed, these exchangers or brokers typically charge fees of 30% or more, which is factored into the exchange rate offered.

Thus buying and selling IQD could result in losses of 50% without the exchange rate moving.

Redenomination happens in cases of high inflation, where old high-value notes convert to new smaller value notes by removing zeros to increase the buying power of the currency. There have been rumors of plans to redenominate the dinar but nothing has resulted from these rumors.

Redenomination without revaluation would not increase the value of the IQD. Those holding old notes would likely just have to swap for new ones, likely incurring additional fees if outside Iraq.