It’s no front-page news that Iraq is a dangerous place. But a capital magnet? The presses have stopped for less. According to the not-quite closed record book for 2007, Iraqi sovereign bonds, the Iraqi currency, and the Iraqi stock market have each logged astounding, not to mention politically provocative, gains.
Not many would have predicted that Iraq’s longdated, dollar-denominated debt would have proven a safe haven during a worldwide credit crisis. But the 5.8s of 2038 did just that. Since the subprime mortgage meltdown began in August, these evidences of indebtedness of the government in Baghdad have gained no less than 18.3%. With a salute to General Petraeus and the doughty GIs under his command, one might say they surged.
So has the dinar, up 10% against the dollar this year. Now the dollar, admittedly, is no monetary fortress, and the dinar is one of the few Middle Eastern currencies left free by its issuing government to float in value (the exchange rates of most of the region’s scrip are lashed to the dollar). The price of a barrel of oil, of which Iraq is a leading producer, has had a pretty good year itself. Still, during the 2007 New Year prediction season, how many guessed that the dinar would outperform the communist Chinese renminbi (up 6.3%) or the Russian ruble (up 6.8%)? The name of no such monetary prophet jumps to mind.
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