As Iraq grows more stable, is the dinar a good investment? Experts don't think so.

Byline: Regional Press Network (RPN)

Summary: <p>Everyone is talking about the Iraqi dinar. Forex speculators and small investors alike are investing in the new currency hoping for big returns.AaAs Iraq becomes more and more stable, more Iraqis, Arabs and foreigners are looking at the Dinar as one of the most promising currency to trade. But is it a hoax or is Iraq's new money really a way to get rich quick?

Jad BaghdadiAa

Regional Press NetworkAa

Aa

BAGHDAD: Everyone is talking about the Iraqi dinar. Forex speculators and small investors alike are investing in the new currency hoping for big returns.AaAs Iraq becomes more and more stable, more Iraqis, Arabs and foreigners are looking at the Dinar as one of the most promising currency to trade. But is it a hoax or is Iraq's new money really a way to get rich quick?Aa

Currency traders who spoke to RPN recalled when the Kuwaiti dinar declined to a valuation of 10 cents after the invasion by Iraq. However, since January 5, 2003, the previous weighted currency basket peg was switched to a higher valuation of 0.29963 dinar.Aa

This translates into $3.34 per dinar, the world's highest valued currency. Translating this into an exchange rate transaction, a $10,000 initial investment around the Gulf war would yield the investor a 3,240 percent rate of return of $334,000.Aa

The same expectations loom over the Iraq economy. Rich in crude exports and likely to remain under the guidance of the US, the country is expected to make a rebound and be catapulted into the global economic arena. The improvement and expansion are expected to be reflected in the underlying currency, creating instant profits for the dinar speculator.Aa

But experts warn of the many scams surrounding the dinar. "Do a search for Iraqi dinar and you'll find sites that offer forums and discussions that talk about this great investment," Robbie Hallab, a currency trader in Lebanon told RPN.Aa

"In fact, chances are you'll find almost all of the top sites owned by the same people who work together to flood the market with promises of getting rich," he added.Aa

Some ads claim investors may be able to double or triple their money in just a few weeks if they buy right now.Aa

And Americans along with Arab investors are snatching up the Iraqi dinar. "My business partner gave us a tip that the Iraqi dinar would be converted into the US dollar and when that happens the dinar would soar in value," says Jim Lacko out of Pennsylvania. He said it sounded too good to pass up. So Lacko invested a modest $300. But a few weeks later, when he checked the value, it was down to $250.50. While the Iraqi dinar has gone up, vendors can charge up to 50 percent commission. Even banks charge currency transaction fees and without significant appreciation, you will lose money buying and selling back.Aa

Experts say the rumors and Internet ploys are not true. All that glitters may be gold, but it comes at a price. The first barrier has to do with pricing. Formally introduced in October 2003, the new Iraqi dinar is virtually worthless, trading at 1,460 dinars to $1.

However, with the dinar still not on the international open market, exchange rates for the currency vary widely. On the streets, the value of the dinar can be as high as 1,500 dinars to the $1. Comparatively, the International Monetary Fund has specified a fixed exchange rate of 1,449 at the central bank of Iraq.Aa

The discrepancy goes as far as trading companies and dealers, which handle the retail public, quoting amounts as different as 1,050 to 1,356 per $1. The differences in prices can contribute to an unfairly priced market.Aa

"So, the only people getting rich right now are the dinar resellers," Hallab said. "The dinar investors are the ones taking the big gamble with odds comparable to your local lottery," he added.Aa

Granted, the opportunity does exist. However, to buy the dinar or not to buy the dinar at this juncture, that is the question.Aa

Although a highly rewarding opportunity, buying Iraqi dinars on the Internet is a risky transaction. Call it straight-out gambling. Nothing is guaranteed and the risk-reward ratio is low. This simple fact will likely keep a majority of traders out of the market. As a result, with varied prices, a handful of participants and plenty of fraud potential, the dinar market is one that has numerous barriers that will likely hang around for a while and attract only those that are misinformed.Aa

"If you have extra cash and believe in long shots, and I mean long, then go for it," a currency trader out of New York said. "Otherwise, take your money and invest it in something with better odds."

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