AGHDAD, Iraq, May 16 - Saddam Hussein may be out of power or even dead. But his maligned currency, the so-called Saddam dinar, has abruptly skyrocketed in value.
In a display of what might be called Saddam's revenge, the discredited dinar soared by about one-third against the dollar on Thursday and is now at its highest value since 1996. Its remarkable comeback is likely to cause heartburn for American officials here, and not just because Iraq's currency of choice bears a portrait of the former dictator on every bill.
A potentially bigger problem is that the dinar's surge and the dollar's plunge have wiped out a big part of the purchasing power of the $20 emergency payments American administrators have been handing out to workers in lieu of their unpaid monthly salaries.
Iraqis, from police officers and teachers to government officials, are grumbling that the $20 was a poor substitute for the pay they have not received since March. But now, taking account of the dinar's total rise over the past month, the payment, which used to equal 40,000 dinars, is now worth about half that much.
"Prices in the market have not changed a bit," grumbled Sadiq al-Hamoundi, as he contemplated the diminished value of the $10 remaining from his wife's emergency payment. "This isn't going to last another three days."
Iraqis have a great deal of experience with exchange rates, despite Mr. Hussein's effort to maintain an official exchange rate at the absurdly overvalued level of $3 per dinar.
On Kifah Street - the gritty and occasionally violent open-air meeting place for hundreds of currency traders and cigarette smugglers - the most prevalent theory for the dinar's startling surge was that the Americans did it to themselves by flooding the market with more dollars than people wanted to spend.
With the Americans handing out $20 payments to several million Iraqi workers and preparing to give $40 to about one million pensioners, traders said they were essentially speculating on a looming saturation of dollars. "If you have one million pensioners getting $40 apiece, that's $40 million coming onto the streets," said Ahmed Muhammad Ali, a trader on Kifah Street. "What did you expect would happen?"
Saddam dinars have defied expectations for some time. In the last days of Mr. Hussein's government, dinars sank to a low of more than 3,000 to the dollar, and American officials expected them to fade away into worthlessness. But after the war, defying expectations that Iraqis would want to dump dinars as fast they could, the dollar dropped back to 2,000 dinars and more recently to about 1,500.
On Thursday, the dinar suddenly exploded in value and dealers refused to offer anything more than 1,000 dinars to the dollar - an increase of one-third in a single day - and some dealers were not paying more than 900.
Iraqis' preference for the dinar comes despite the currency's inconvenience. The only denominations in use are the 250-dinar note, worth about 25 cents at current rates, and the 10,000-dinar note. Buying just a week's worth of groceries can require a three-inch-thick stack of 250-dinar notes, which is why upscale shops have bill-counting machines that flip through 100 bills in seconds.
Because the central bank has not been able or willing to print extra supplies, the number of dinars in circulation, and hence their value, has remained stable. Further, as the thousands of foreigners working here began realizing the currency's resilience, they have been buying up dinars in ever larger quantities, adding to the demand.
Some traders suspected another force at play, saying the dollar's plunge may have been aided by a huge release into the markets of money that looters stole from Iraq's banks and government ministries.
There were also hints that one or another group of traders was trying to manipulate the system. Since Thursday, many currency exchange shops were refusing to sell dollars at anywhere near the prevalent rate of 1,000 to 1.
The soaring dinar was Topic A today at Alaa Hussein's barbershop on Kharada Street, one of Baghdad's big shopping areas.
"It's an attempt by coalition forces to reduce inflation," one customer theorized. Another said it was a sign that Iraqis wanted to run their own lives.
Still others recalled the last time Saddam dinars soared in value. That was in 1996, when a dollar was worth nearly 3,000 dinars. To prop up the dinar, Mr. Hussein ordered major government purchases of the currency as well as big sales of dollars. As a result, the exchange rate dropped to a mere 580 dinars per dollar.
No such intervention appears to be under way today. But traders and ordinary shoppers alike are anxious about potential big swings.
"It's all based on rumors," said Rasheed Taheir, another customer in the barbershop. "You had rumors when the currency collapsed, and rumors again now when it goes up. Nobody really knows what's going on."
<http://www.nytimes.com/2003/05/18/international/worldspecial/18MONE.html> ***** -- Yoshie
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