Advisor: The Rafidain Bank’s Entry Into The Currency Auction Provides Stability In The Exchange Market

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16th October, 2020

The Economic Advisor to the Prime Minister Mazhar Muhammad Salih confirmed that the intervention of the Rafidain Bank in the activities of buying and selling may provide stability in the exchange market.
He said in a press statement followed by Al-Mustaqilla today, Friday, that: The development of windows for selling the dollar through the First Governmental Commercial Bank, i.e. Al-Rafidain Bank, is the embodiment of the money market operations that the bank practices to buy and sell dollars with its customers from banking companies on behalf of the monetary authority.
Saleh added that: This matter is a new direction to develop the operations of the (wholesale) money market for foreign currency. The intervention of Al-Rafidain in the activities of buying and selling may provide stability in the exchange market, but depends on meeting the new window for the total foreign cash demand (from outside the remittance market) because it is feeding Demand by way of remittances is still one of the tasks of selling and buying foreign currency for the Central Bank of Iraq, which constitutes more than 90% of the need for foreign exchange in order to finance foreign trade for the private sector.
He explained that: There is a correlation in the formation of the exchange rate and its movements in the secondary market between the remittance market and the cash dollar market. The latter market is highly correlated and highly sensitive to the information market and is affected by it quickly, so the cash dollar market is considered one of the most sensitive markets in driving the price in the parallel market for exchange, but it is encouraging at the same time to form an effective and highly flexible offer from outside the Rafidain monetary window.
And Saleh continued that: By virtue of the current monetary behavior of individuals in the local economy that is semi-dollarized and the composition of the demand for foreign currency, which is based on the hoard of individuals in foreign currency or their bank deposits in the same foreign currency, we find that there is a foreign reserve (latent) and prepared for effective supply in the cash dollar market estimated by Some, in total, are not less than 7-10 billion dollars, which are saturated sums that are kept with individuals, most of which are outside the local banking system, and are sometimes used in settling large internal transactions, such as dealing with real estate, land, transport, gold, and others.