Currency sterilization policy (low auctions)
Great explanation of the auctions and what the low auctions mean
What Does Sterilization Mean?
A form of monetary action in which a central bank or federal reserve attempts to insulate itself from the foreign exchange market to counteract the effects of a changing monetary base. The sterilization process is used to manipulate the value of one domestic currency relative to another, and is initiated in the forex market.
For example, to weaken the U.S. dollar against another currency, the Fed would sell more U.S. dollars and buy the foreign currency. The increased supply of the U.S. dollar would lower the value of the currency. The Fed would do the opposite if it wanted to strengthen the U.S. dollar.
Saleh is reassuring the foreign currency brokers that the drop in sales is due to sterilizing the CBI against the coming change of the dinar on Forex. This means they are RV'ing, and the process has started.
This is simply HUGE! I quote "he called "sterilization policy currently pursued by the Central" Ok in a nut shell, this A form of monetary action in which the central bank attempts to insulate itself from the foreign exchange market to counteract the effects of a changing monetary base. The sterilization process is used to manipulate the value of one domestic currency relative to another, and is initiated in the forex market. Do you see where I am going with this???? Better yet simply Google "currency sterilization policy" and you will fully understand the dynamic of what is taking place and why the auction results are trending in the current direction. Remember when reading this the difference in Monetary & Fiscal Policy! Monetary policy is under the control of the Federal Reserve System or in Iraq (CBI) and is completely discretionary.
It is the changes in interest rates and money supply to expand or contract aggregate demand where as the Fiscal Policy, is changes in the taxing and spending of the (GOI) for purposes of expanding or contracting the level of aggregate demand. An example of this is say in a recession, an expansionary fiscal policy involves lowering taxes and increasing government spending.
Stop foreign transfers and a warning from the recovery (DAILY CURRENCY AUCTION)
May 3 2011
http://www.burathanews.com/news_article_121780.html
The Iraqi central bank on Monday, the news talked about canceling the daily currency auction, causing a decrease rate of the dinar against the dollar, stressing that he apply the "sterilization policy" against money laundering, which is practiced by some companies, financial intermediation in the country.
Denied
But the owners of exchange companies, warned of the downside risks to the volume of trading in hard currency on the domestic market, pointing out that the Central Bank's call for a "tax number" will help stop the smuggling of currency because of foreign remittances.
Fell sharply central bank sales of the dollar over the past few days, against the backdrop of a request to provide bank foreign exchange companies, views the conversion, disclosures include the names of customers and other information about them.
It was unclear why the refusal of most customers to the requests of the Central Bank of view tax statements, but the likely sources of finance for the "world" to be on the back of it "concerns the identification, the financial position of political parties or large companies and so on."
And enjoyment of the Iraqi dinar remarkably stable during the last five years led to the lifting of its value against the dollar from 3 thousand to the dollar to 1700 dinars.
And reduced the Central Bank of Iraq would drop sales of the dollar over the past few days, expressing no fear of the reluctance of customers, emphasizing his ability in big missed the crisis.
In a statement to "the world" I have a central bank adviser appearance of Mohammed Saleh sales decline, attributing it to what he called "sterilization policy currently pursued by the Central." He pointed out that it was due to "claim the central bank to brokerage firms to provide tax account number to their customers."
Saleh said that this action comes within the "framework for coordination between monetary and fiscal policy," stressing that such a new policy adopted by the central bank to "ensure a sound monetary policy is far from money laundering and illegal methods."
He continues, a senior adviser to the Iraqi Central Bank by saying "This was a cause of action in the reluctance of customers, we do not know the reason behind it as long as we talk about legal means, which places these customers in the Department of charge due to fear of the tax maybe."
And on the reaction of financial companies to broker the new policy by the Central Bank, sees the appearance of it, "not only a matter of time and could take days," and stresses that "the aim of which is the pressure in order to undo the current monetary policy."
And on the side effects to the decline in Central Bank auction on the exchange rate in the local market, "says Saleh said that" the Bank has a remarkable ability to overcome so that it could return the exchange to any price he wishes. Rumors are not afraid of speculators and owners of other business goals. "
And about the stalemate which has damaged central bank activity recently, he drew the favor of that "on Tuesday will see the new data through the bank's expansion in the presentation of foreign currency for customers of the Central are banks, in the form of Ahikhalv law against money laundering in violation of coordination with fiscal policy in the field of income tax."
And confirms a senior adviser to the Central Bank that "This expansion has enabled the central yet to collect the largest reserves in the history of Iraq, a $ 53 billion," pointing out that the latter "sells nearly $ 35 billion annually, in the sense that it converts two thirds of oil revenues."
The central bank held five sessions per week for the sale and purchase of foreign currencies, and receive a commission on the sale of foreign remittances and the cash amount of 13 dinars per dollar.
In the same context, a financial expert has warned of the dangers of falling sales of the currency on the domestic market, and expected recovery of currency smuggling because of the recent central bank measures.
In an interview with "the world," said Amir Matar, the owner of well-known foreign exchange company in Baghdad, said "the Central Bank of Iraq has not only sold twenty million dollars, while he was selling up to ten days ago, nearly two hundred million a day."
He adds that "the Iraqi market needs to at least 150 million dollars a day, but the low sales of the dollar will have an impact on consumer prices, and the injured citizen would be first place."
He attributed the decline in sales of auction-Sarraf the central bank to "differences with the latter and the Ministry of Finance."
The claim about the central bank to financial intermediation companies disclosed the number of tax clients, finds that "this will stop the auction is final, by the refusal of customers", and stresses that he "will contribute to the smuggling of currency, due to suspension of remittances, which will reflect negatively on the national currency."
He pointed to the cashier that "the high dollar exchange rate reached a record high today (yesterday) Monday," noting that it "is not currently controlled."
