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Last Updated: Thursday, 15 January, 2004, 16:34 GMT
Iraqi dinar reaches post-war high
Iraqi money changer
The dinar's appreciation has been spurred by speculation
The value of the Iraqi dinar has reached post-war highs, amid a wave of new confidence in the Iraqi economy.

The currency has doubled in strength against the dollar since Saddam Hussein was overthrown last year.

Analysts attribute its rise to hopes of a surge of US funds into the country to finance reconstruction projects and speculators hoping to make quick gains.

It comes as the old dinar bearing Saddam Hussein's face ceased to be legal tender on Thursday.

The dinar has risen about a third in value against the dollar since new banknotes began to circulate last October.

One US dollar bought around 1,000 dinars in Baghdad on Wednesday, compared with more than 2,000 at the time of Saddam Hussein's overthrow.

During the war, the dinar topped 3,500 to the dollar.

Smuggling

The BBC's Mark Gregory says one factor in the change has been the gradual pick-up of the Iraqi economy after the devastation of the war.

Old dinars marked with dye to prevent their recirculation
There are, he says, simply more transactions taking place, which supports the value of the currency.

Large amounts of the new currency have been smuggled out of Iraq into neighbouring countries by speculators hoping to make a profit.

Smuggling has contributed to a shortage of new banknotes and scarcity has pushed up their value.

But Iraqi Central Bank Governor Sinan Shibibi said the dinar's strength was artificial.

"People have bright prospects for the Iraqi economy... It is now a trustworthy currency, but [the rise in value] is not justified because it's a big jump, you really want something smooth."


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