Iraqi Dinar Drops Sharply Against Dollar as People Hurry to Trade

Market Uncertainty Drives Dinar Decline

In Erbil, the Iraqi dinar has seen a significant drop on Tuesday, with the value of $100 rising to 157,000 dinars from 149,000 dinars just a day earlier. This rapid increase is indicative of heightened demand for the US dollar as various public concerns fuel a preference for holding onto it rather than the local currency.

Tahsin Kushnau, who runs a currency exchange in Erbil, remarked that the dollar’s value has surged recently. “At one point, half of the cash in exchange offices was in dollars and half in dinars,” he explained. “Now, about three-quarters of our cash is in dollars, and only a small part remains in dinars. This rush to convert dinars into dollars is largely due to public apprehension.”

Kushnau also mentioned that administrative shifts have played a role. The flow of dollars to local merchants via the Central Bank of Iraq has been disrupted, particularly with the rollout of a new electronic customs system, leaving many traders without official dollars and turning to the open market instead.

“A lot of residents are exchanging dinars for dollars due to a lack of confidence in future stability,” he noted.

He pointed out that political uncertainty in the region, along with worries about possible US sanctions over militia involvement in the government, have further pressured the dinar.

Since early January, both the Kurdistan Region and Baghdad have seen the dinar rapidly devalue against the dollar. Delays in the official exchange transfer system and new regulations have led to increased demand for dollars, which has contributed to the recent surge.

Adding to the dinar’s volatility, the Central Bank of Iraq has imposed fines on local banks for breaches of banking regulations, amounting to a substantial 34.4 billion dinars over the past three months. In the latter half of 2025 alone, there were 13 fines totaling over 18 billion dinars.

Last year, the Central Bank issued a total of 120 fines related to assets, mainly in the first quarter, illustrating its efforts to enforce compliance among Iraq’s 74 licensed banks. These sanctions are often tied to fraud related to cash and electronic transfers, which has contributed to uncertainty in financial markets.

The dinar’s steep decline coincides with increased US pressure on Baghdad to bolster electronic dollar transfers and the involvement of militias in the new government.

This local currency slump comes at a time when global gold prices have reached historic highs, surpassing $5,100 an ounce, reflecting broader economic and geopolitical instability.

Kaifi Mohamed, a spokesperson for the Erbil exchange market, noted that market confidence is being undermined by these administrative and political issues.

The difficulties merchants face in processing through official banking systems for the dollars they need for international trade are further exacerbated by US concerns about militants in Iraq’s upcoming cabinet, causing many traders to rush for dollar acquisition, which is further driving down the dinar’s value.

Simultaneously, the global gold market showcases geopolitical risks and large bullion purchases, along with expectations of lower interest rates from the US Federal Reserve, amplifying the dinar’s instability.

Economists are sounding alarms that Iraq stands at a “dangerous crossroads.” Potential US threats to limit access to the nation’s oil revenues could lead to significant financial upheaval.

Experts emphasize that economic stability now hinges on political and security stability, with everyday citizens facing the repercussions of a depreciating currency and rising living costs.