The currency of the new Iraq is the dinar, same as before, but with a different design and not featuring the image of the former dictator Saddam Hussein of course.
Many investors are gambling on the dinar by buying the currency from online currency dealers, eBay and by trading the dinar on Forex.
A Tale Of Two Dinars
Back before the war the dinar was trading at roughly three to one U.S. dollar. Now it is in the 1200 to 1 range. There is a parallel story to the Iraqi dinar, the Kuwaiti dinar. The currency of Kuwait is also called the dinar, though the two are unrelated. Before the invasion of Kuwait their currency was also trading at three to one. It fell to a value of only about ten U.S. cents during the brief period that Saddam Hussein occupied Kuwait.
When coalition forces liberated Kuwait the value of the currency rapidly returned. For those lucky enough to acquire the currency during those dark days of occupation, there was a nice profit to be made. Investors knew that because of Kuwait’s immense oil wealth that the value of the dinar would rapidly return.
Iraq is a different situation entirely however, with many years of occupation and civil war affecting the economy. Where the two cases are similar is that stability does seem to be slowly returning to Iraq and the country has immense oil reserves. In fact many experts agree that Iraq holds the world’s third largest reserves of oil.
With a situation like this, and the Iraqi dinar trading in the 1200 to 1 range, it very well may be good investment.
Any number of situations could arise to disrupt the stability of Iraq in the coming months and foreign investors could pull out of the country. There are currently several major oil companies negotiating with the government of Iraq to resume exploration and production. If militants don’t disrupt the flow of oil we could see the value of the Iraqi dinar as an investment skyrocket.
One should exercise caution and recognize that currency trading is highly speculative. Beware of counterfeit bills, as there are many in circulation. Most counterfeit bills are small denomination bills. For how to recognize a counterfeit Iraqi dinar see: How To Recognize A Counterfeit Iraqi Banknote