As the year 2023 draws to a close, the forex market is set to be influenced by various factors. One of the key factors is the policies of central banks, which have a significant impact on currency values. The decisions made by central banks, such as the Federal Reserve in the United States, can affect the strength or weakness of the US dollar. Additionally, geopolitical tensions in the Middle East are also expected to play a role in shaping the forex market. Conflicts and uncertainties in the region can lead to fluctuations in currency values. Another important factor to consider is the diverging economic growth trajectories of different countries. For example, the US and the UK may have contrasting economic performances, which can impact their respective currencies. Traders and investors are advised to use live charts to make informed trading decisions, as these charts provide real-time data and insights into market trends and movements. By staying informed about these factors, traders can navigate the forex market more effectively and potentially capitalize on opportunities.
The foreign exchange market has evolved extensively over the past twenty-five years, with average daily turnover increasing from $1.5 to $7.5 trillion between 1998 and 2022. FX spot trading volume has stagnated, while growth has come from activity in FX swaps. The U.S. dollar remains the dominant currency in the FX market, accounting for 88% of all transactions in 2022. The mix of FX market participants has changed, with trading between dealers at large banks declining and trading between dealers and other financial counterparties increasing. The trading environment has become more complex, with the number of execution methods and trading platforms growing. Concerns exist about the impact of high-frequency trading on price discovery and the risk of less-sophisticated market participants being disadvantaged. Efforts have been made to reduce FX settlement risk and promote responsible market conduct through the establishment of the Continuous Linked Settlement institution and the FX Global Code. The FX market is expected to face challenges in the future, including the transition to shorter settlement times and the potential adoption of central bank digital currencies.
According to the Central Bank's Economic Bulletin for January 2024, credit card transactions accounted for 40% of all foreign exchange sales over $20,000 last year, representing an increase of more than eight percentage points compared to 2022. Retail and distribution accounted for 18.4% of transactions, energy companies accounted for 16.8%, automobile companies accounted for 5.9%, and manufacturing firms accounted for 5.6%. The Central Bank also reported a significant drop in the amount of foreign currency converted by energy companies in 2023, following a 29.0% drop in conversions compared to 2022. The sale of US currency to the public reached over $4.9 billion last year, an increase of $126 million compared to 2022. The sale of Jamaican dollars also increased, with Ja$7.4 billion sold in 2023, representing a 64% increase compared to 2022. Overall, the US dollar equivalent of sales of all foreign exchange by authorised dealers to the public reached $6.2 billion last year, a decrease of 4.9% compared to 2022. The Central Bank injected a further $50 million into the banking system on a one-off basis in addition to its usual fortnightly injection. Excess liquidity in the financial system increased in the second half of 2023, with a daily average of $5.5 billion compared to $5.1 billion in the same period in 2022. The Central Bank sold $1,341.9 million to authorised dealers to support the market. The net sales gap reached $1.6 billion in 2023, a 57.8% increase compared to 2022. The Central Bank's Monetary Policy Committee maintained the Repo rate at 3.50% in September and December 2023. Business credit remained robust, while system liquidity remained sufficient. The demand for foreign currency loans remained strong, while foreign currency deposits continued to decline. The local market for foreign currency remained tight in 2023, with lower than usual energy sector conversions. The Central Bank stated that excess liquidity was managed to facilitate the smooth operation of financial markets.
In February, the Central Bank of Iraq sold more than $4 billion in its hard currency auction for the US dollar. The sales of foreign remittances reached $3,585,442,837 dollars, up by 88% compared to cash sales. The selling price of documentary credits and international settlements for electronic cards was 1305 dinars per dollar, while the selling price of remittances abroad and the cash selling price was 1310 dinars per dollar. [546d56fc]
The Iraqi Central Bank (CBI) recently sold over $750 million in hard currency during the past week, with most of it transferred abroad. The sales were made in cash and transfer abroad to finance foreign trade. The highest dollar sales were recorded on Wednesday, reaching $254,470,640, while the lowest was on Sunday, totaling $240,715,788. Foreign exchange sales amounted to $710,439,822, an increase of 90% compared to cash sales. The selling price for documentary credits and international settlements for electronic cards was 1,305 IQD per dollar, while the selling price for transfers abroad and cash sales was 1,310 IQD per dollar. [05051ff4]
The Central Bank of Iraq (CBI) recorded a 96% surge in external remittances, reaching $237 million in cash sales. The CBI sold a total of $245,545,947 in its auction, with most of the sales going towards bolstering balances abroad. Only one bank purchased cash dollars, while 18 banks fulfilled requests to enhance balances abroad. The CBI conducts regular currency auctions to manage the country's monetary policy and stabilize the exchange rate. These auctions serve as a mechanism for banks and financial institutions to buy and sell foreign currency, primarily the US dollar. The auctions play a role in regulating the flow of foreign currency in and out of the country, helping to manage Iraq's balance of payments. [0817c287]
Iraq's Central Bank has reported a significant increase in overseas dollar transactions through the official global SWIFT system. The country has imposed restrictions on the use of American dollars domestically and adopted the SWIFT system to tackle money laundering and ensure respect for international sanctions. Transactions through the Central Bank's electronic platform have increased from $50 million per day at the beginning of 2023 to around $200 million per day. However, the black market for dollars is still thriving, with the official exchange rate fixed at 1,320 dinars to the dollar and the unofficial market trading at 1,470 dinars per dollar. Iraq has close commercial ties with Iran, and sanctions preventing dollar transfers to Iranian banks have driven Iraqi traders to the black market. Iraqi authorities have banned more than 20 banks from conducting dollar transactions in accordance with US regulations, but they are allowed to operate local transactions. The Central Bank is in contact with the US Treasury to lift the ban. [000ab022]
Iraq's Central Bank has significantly increased overseas dollar transactions through the official global SWIFT system in an effort to combat the booming currency black market. The country's banking sector adopted the SWIFT system at the end of 2022 to tackle money laundering and ensure compliance with international sanctions. Transactions through the Central Bank's electronic platform, which ensures compliance with SWIFT, have considerably increased, reaching $200 million per day. However, the black market for dollars still thrives, with the unofficial exchange rate trading at 1,470 dinars per dollar compared to the official rate of 1,320 dinars per dollar. Iraqi authorities have banned more than 20 Iraqi banks from conducting dollar transactions in accordance with US regulations on sanctions and money laundering. [8f72e806]
Russia's central bank has extended restrictions on transferring funds abroad for another six months. Until September 30, 2024, Russian citizens and non-residents from 'friendly countries' will still be able to transfer no more than $1 million or its equivalent in other foreign currencies to any accounts in foreign banks within a month. Russia considers countries that imposed sanctions against it as 'unfriendly'. [191a208e]
Western Union has resumed its money transfer services to Cuba after a 'cybersecurity incident' halted the service in January. The company stated that clients will be able to send up to $2,000 in a single transaction to people in Cuba with accounts at Banco Popular de Ahorro, Banco Metropolitano S.A., and Banco de Crédito y Comercio. The funds will be available on the same day in Cuba, including weekends and holidays. However, it is unclear how much of the remittance market Western Union is capturing, as many transactions have moved to the informal market operating in dollars in recent years. The informal remittance market has also been critical to the development of an emerging private sector on the island. Western Union had to close more than 400 offices in Cuba in late 2020 after its processing partner, Fincimex, was sanctioned by the Trump Administration for its ties with the Cuban military. The Cuban government later created a new financial entity, Orbit SA, to process remittances on the island, and Western Union resumed its services in March 2021. The resumption of money transfers comes at a time when the Cuban economy is in free fall and shortages are widespread. The government stores that sell products in MLC (Cuba's virtual currency) are usually empty, making money transfers in local Cuban currencies less attractive. The informal remittance market has raised concerns about money laundering and has been used by Cuban entrepreneurs to get their money out of the island to pay providers abroad. The resumption of Western Union's services is seen as a vital connection between those living in the U.S. and their families in Cuba. The U.S. Treasury Department has also announced regulatory changes to support small private businesses in Cuba, including allowing Cuban entrepreneurs to open U.S. bank accounts and reinstating 'U-turn transactions,' which enable fund transfers that start and end outside the U.S. [a678b152]
The Biden administration has announced new regulations allowing Cuban entrepreneurs to open bank accounts in the United States for the first time and make remote online transactions. The move is aimed at supporting Cuba's expanding private sector, helping entrepreneurs grow, and encouraging more Cubans to start small businesses. Previously, private owners in Cuba relied on cash remittances from relatives in the United States to finance their businesses. The new rules apply only to independent private sector entrepreneurs with no connection to the Cuban Communist Party, the military, members of the Cuban National Assembly, or anyone on a list of officials sanctioned by the United States. The Cuban government has not yet responded to the announcement. The private sector in Cuba now accounts for nearly a third of all employment on the island, with over 11,000 licenses issued for private companies. [24dc3b34]
The United States has lifted some financial restrictions against Cuba, allowing independent entrepreneurs to open and access US bank accounts online to support their businesses. The changes also include steps to open up more internet-based services and expand private companies' ability to use certain financial transactions. The measures aim to support the Cuban private sector and help alleviate the economic and energy crises in Cuba. The US Department of the Treasury stated that the regulatory amendments promote internet freedom in Cuba and expand access to certain financial services for the Cuban people. The changes come as Cuba is facing one of the worst economic and energy crises in its history, with citizens experiencing blackouts, food shortages, and inflation. The US-Cuba relations have been strained since the 1959 revolution, but some restrictions were lifted under former US President Barack Obama and then reimposed under former President Donald Trump. Cuba has also been gradually opening up its economy to more privately owned enterprises. [f5bbec7c]