They're buying what? U.S. investors latch onto Iraqi dinar

November 15, 2012|Gertrude Chavez-Dreyfuss | Reuters
(Saad Shalash Reuters, REUTERS)


"It's not a question of if, but when Iraq revalues its currency," said the Las Vegas-based Scarpa, who keeps dinars in his retirement account. "The dinar will eventually have substantial value, possibly the highest in the world."


The fundamentals for buying the dinar are precarious. The United States invaded the country in 2003 and has only recently removed most of its troops. The country's political situation remains unstable, and destabilization in the Middle East - most recently with rockets fired between Israel and the Gaza Strip - could undermine the fledgling republic further.

U.S. retail investors' interest in Iraq's currency is part of a broad push for investment opportunities that will give some yield. Most of them cite near-zero interest on their U.S. savings and certificates of deposits as a reason for buying dinars and other exotic currencies.




"If the dinar rises to just even a penny, you would have realized a profit of 900 percent," Scarpa said.



The Kuwaiti dinar is worth about $3.50, while Saudi Arabia's riyal is equivalent to roughly 26 U.S. cents.

The old dinar was worth $3.20 before the United Nations embargo that followed Iraq's invasion of Kuwait in 1990. By August 2002, the dinar had plummeted to a fraction of a penny.

Speculators are betting that given Iraq's potential as an oil-driven economy, the dinar could rise to a value of $1 to $3.

"I looked at the risks and I decided that this is not going to bankrupt me," said 35-year-old Ryan Williams, a former sheriff in Bakersfield, California.

"You invest a couple of hundreds or a couple of thousands of dollars and even if it just appreciated by 10 to 15 percent a year, that's still a lot better than investing in certificates of deposits here."


Hassnain Ali Agha, founder of Las Vegas-based currency dealer Dinar Trade, is the biggest U.S. market-maker in Iraq's currency. He also sells other exotic currencies such as Afghanistan's afghani and the Libyan pound.




"People in the U.S. really feel that Iraq is the next frontier market to make money on," said Agha. "There will come a time when the Iraqi government will have to adjust the dinar exchange rate given the country's oil exports. That will start fueling the fire."
