21 years of Iraqi Dinar exchange rate fluctuations, 3 main factors

Shafaq News

28-02-2025

Shafaq News/ Two decades of fluctuations in the exchange rate of the Iraqi Dinar against the US dollar in the parallel market, had been analyzed, identifying a mix of internal and external factors as the key drivers, in a report released by the "Future Iraq" Institute for Economic Studies and Consultations.
Covering the period from 2005 to 2024, the report revealed significant volatility in the Dinar's value against the dollar over 21 years, influenced by various political, economic, and legislative factors.
According to the institute's analysis, "supply and demand were the most influential factors," with changes in the exchange rate varying across different months due to internal and external dynamics.
The report highlighted several key factors affecting the exchange rate, including the timing of the release of the national budget and public holidays in major commodity-exporting countries such as China and Iran. "The changes in exchange rates followed distinct patterns, notably with specific months of the year showing more significant variations," it states.
Upon reviewing exchange rate data from 2005 to 2024, the report identified a recurring trend, with certain months showing a greater impact on the Dinar's value than others. December was the month most frequently associated with a rise in the Dinar's value, witnessing an appreciation in 13 of the 21 years studied.
Other months with notable increases in the Dinar's value included August and June, each seeing gains in 11 years, followed by April with 10 occurrences. October and November showed improvements in 9 years, while March saw an increase 8 times.
May stood out as the month with the least frequent depreciation of the Dinar, with its value rising in only 4 of the 21 years under review. This suggested that the Dinar tended to appreciate in February, March, and April, only to dip again in May as demand increases.
Despite the evident seasonal impact on exchange rates, the institute warns that other factors must also be considered. These include the Iraqi Central Bank's dollar sales, which directly influence the money supply in the market, and political and financial factors such as the timing of the public budget's release. Geopolitical conditions also play a role, with unexpected disruptions in demand for foreign currency potentially driving exchange rate volatility.
In conclusion, the analysis underscored that while seasonal patterns remain a key driver of the Dinar's fluctuations, factors such as monetary policy, political developments, and economic conditions have a direct impact on the parallel market. The report stressed the importance of monitoring all these variables to gain a more precise understanding of exchange rate movements.