Great News For The Iraqi Dinar Trade Surplus Grows Fatter
In recent months, hidden behind the scary headlines coming from Iraq, there’s been some great news for the Dinar – The country’s trade surplus is fat, and it’s becoming fatter each month because of growing oil revenues. This is indeed good news for Dinar investors, since it increases pressure on the Central Bank of Iraq (CBI) toward a currency revaluation.
A number of economic variables influence the value of a nation’s currency, but few are as important as the trade balance. The trade balance is the difference between the total value of a country’s exports and imports.
A trade surplus (i.e. when the value of exports exceed the value of imports) tends to boost the value of a nation’s currency, which is very helpful for investors. Over the past few years, and especially during recent months, Iraq has boosted its trade balance considerably. This means the value of the Dinar should rise accordingly.
Why is the trade surplus a boon for the Dinar?
The trade balance is one of the biggest factors affecting the value of a sovereign currency. That’s because when countries purchase goods from other nations, they must pay by using the seller’s currency.
So, central banks of importing nations must convert their own currency to that of the exporting country. The increased demand for any given currency causes its value to rise. As a result, countries with strong trade surpluses tend to have much stronger currencies.
Since the trade balance plays such a key role in determining the value of a national currency, Dinar investors should play close attention to trade balance reports to gauge the health of the Iraqi economy.
The Central Bank of Iraq (CBI) publishes this information every year, but it is difficult to find on their website. You can more easily review Iraq’s balance-of-trade info at Trading Economics. And, below are some additional economic factors which influence the value of the Dinar.