Syria Plans to End Dollar Peg, Moves Half of Reserves to Euros

[BIG WAVE]

July 11 (Bloomberg) -- Syria, under fire from the U.S. for the alleged support of terrorism, plans to end its currency peg to the dollar by year-end to reflect closer trade ties with Europe, central bank Governor Adib Mayaleh said.
The Central Bank of Syria has already converted half its foreign-exchange reserves to euros, Mayalmi said in a telephone interview from Damascus, without being more specific. Syria's reserves, including gold, totaled $4.1 billion at the end of 2005, according to the U.S. Central Intelligence Agency.
``We want to have a currency peg that will reflect our external trade,'' Mayaleh said yesterday. The European Union is Syria's largest trading partner, taking half of its exports, he said.

The country may instead link the Syrian pound to a weighted group of currencies including the euro or loans from the International Monetary Fund that are known as Special Drawing Rights, Mayaleh said. SDRs comprise the euro, dollar, yen and British pound.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aSA_0pchCRFY&refer=

[BBbucks]

July 11 (Bloomberg) -- Syria, under fire from the U.S. for the alleged support of terrorism, plans to end its currency peg to the dollar by year-end to reflect closer trade ties with Europe, central bank Governor Adib Mayaleh said.
The Central Bank of Syria has already converted half its foreign-exchange reserves to euros, Mayalmi said in a telephone interview from Damascus, without being more specific. Syria's reserves, including gold, totaled $4.1 billion at the end of 2005, according to the U.S. Central Intelligence Agency.
``We want to have a currency peg that will reflect our external trade,'' Mayaleh said yesterday. The European Union is Syria's largest trading partner, taking half of its exports, he said.

The country may instead link the Syrian pound to a weighted group of currencies including the euro or loans from the International Monetary Fund that are known as Special Drawing Rights, Mayaleh said. SDRs comprise the euro, dollar, yen and British pound.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aSA_0pchCRFY&refer=

Found something interesting in this article- how can a country with only 4.1 bil in reserves support a currency that is worth 52.2 per dollar?? DinarDave?? Anyone?? Bueller…Bueller :confused: :lmao:

[Pindar]

Found something interesting in this article- how can a country with only 4.1 bil in reserves support a currency that is worth 52.2 per dollar?? DinarDave?? Anyone?? Bueller…Bueller

OK...I'm with you on trying to figure out the answers to DinarDave's argument, and I'm sure he will give us his answer to your question, but I'm going to take a stab at it. I think he will say something like this:

The M2 for Syria was 1,059.3 billion Syrian Pounds (SP) at the end of 2004. E.g. see www.syrialive.net/financial/2005/112005Monetary%20Policy%20and%20Inflation.htm (http://www.syrialive.net/financial/2005/112005Monetary%20Policy%20and%20Inflation.htm) (More search effort would probably turn up a more recent figure.)

So taking that M2 number, your exchange rate number, and a 100% reserve this M2 would supposedly need to be "supported" by a total reserve of 1.0593 trillion SP x 1 USD / 52.2 SP = 20.3 billion USD. This is in the ballpark of 4.1 billion USD. And if only 20% of the M2 had to be supported by reserves, this would come out pretty much on the money.

The corresponding numbers for the current IQD at a 1:1 rate would be something like 9 trillion IQD x 1 USD / 1 IQD = 9 trillion USD. At a 20% support level that still comes to 1.8 trillion USD. From numbers given in other threads it seems like even with oil at $100 Iraq is several orders of magnitude short of having a reserve of 2 to 9 trillion USD.

Based on this reasoning it seems like Syria pretty much fits DinarDave's argument.

Pindar

[Pindar]

You know actually as I look at those numbers I calculated, maybe things don't look so bad. If Iraq has an M2 in IQD nine times larger than Syria's in SP, and if the two countries required the same proportion of reserves for support, then if Iraq had 4.1 billion USD x 9 = 36.9 billion USD reserves they should be able to support a 52.2:1 exchange rate (assuming Syria is a fair example.) 36.9 billion USD reserves for Iraq doesn't seem that unrealistic. This would be great especially considering that Iraq's economy is just starting to recover and they are larger and have far more oil than Syria. Many of us looking for a reval aren't necessarily expecting it to jump right away to 1:1. E.g. some have suggested the next jump might be 1000:1. So maybe Syria actually is a very encouraging example.

I must be making a mistake somewhere and DinarDave or someone else will need to point out where I've gone astray.

Pindar