I have followed the CBI's daily auction for a couple months now, probably 70 - 80 auctions. I like to follow this because it’s the one place where we can see what Shabibi is actually doing with the exchange rate. The auction consists of two parts, the "cash" part and the "transfers out" part.
In the cash part, CBI manages the exchange rate by either buying or selling IQD. For the past year, CBI has always been selling IQD in order to maintain the exchange rate. This is what we would expect - as people expect the IQD to increase in value and as Iraq moves from using USD to IQD for transaction (de-dollarizes), CBI needs to put more IQD notes into circulation. Otherwise the exchange rate would go up.
In the transfers out part, CBI manages that exchange rate by acquiring foreign currency reserves and engaging in other central banker transactions that I don't understand. The parliament recently rejected a move by the government to raid the reserves that Shabibi has built up to fund the budget deficit. Shabibi has used the auctions to keep the IQD at about 1170 to the USD for over a year, despite the fact that the USD has been up and down (mostly down).
Normally CBI posts the auction results on its website to show the official exchange rate that resulted from the auction. Here's a link to Thursday's auction results: http://www.cbi.iq/exchangerate.html The CBI posts only the total amount of dinar sold at the auction and does not provide a break out of the "cash" and "transfers out" segments of the auction. Normally it provides the press with a release that does provide this break out, which is picked up by Aswat al Iraq.
On Thursday, for the first time since I started following this, there was no mention of the CBI auction in Aswat al Iraq. This means that I can't determine the amount of cash IQD notes that were purchased on Thursday, which I like to watch because I would expect a sharp spike if the Iraqi bankers were expecting the value of the IQD to increase - they would be very eager to swap USD for IQD.
I thought that maybe the release was delayed, so I checked again today and it still had not been posted. Also, Aswat al Iraq usually has a story on Friday that summarizes the CBI auctions for the entire week. This also has not been posted today, although there are stories regarding the ISX results for Thursday and for the entire week. http://en.aswataliraq.info/?cat=4
I am just speculating, but perhaps there was a sharp spike in the cash portion of Thursday's CBI auction, which the CBI did not want to reveal. The total amount of the auction, $131.6, was relatively strong but without the breakout of the cash portion its tough to draw any conclusions.
Maybe we will see a story on Saturday or Sunday about the CBI's Thursday auction results but if we don't, perhaps something is brewing!
CORRECTION / CHAZMAN DEBUNKING PART OF HIS SPECULATION IN A "PM" TO ME (Dinar Daddy):
DD,
I just posted that there is another place on the CBI website that shows the cash portion of the Thursday auction and it was pretty low, which debunks my speculation. But, just doing the explanation of the CBI auction helped me understand it better and hopefully will help some other. Take care, Chazman
Friday, January 22, 2010
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3 comments:
I too was wondering what was going on with the auctions. Seems a little strange in a good sort of way. Maybe they decided to have another "Bank Holiday". My pet hamster thinks it has to do with the coming of the RV. He has been wrong so many times that he has to be right one time. I would not hold my breath.
Thank you, Chazman.
How refreshing...intelligence rules the day....and not egoic b.
The cash amount is always listed on the Arabic auction page, one doesn't have to wait for the newspapers for that information. But for whatever reason, the CBI never posts that cash amount on the English page. But that cash amount is posted to the historical data pdf.
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