The foreign exchange market is attractive and volatile and responds to changes in economic policies, political stability, and world trade. As for the less-known currencies, the Iraqi Dinar (IQD) and the Vietnamese Dong (VND) seem to be rather interesting for investors and enthusiasts in general. The two currencies have a history of their own and go through different economic indicators. This article gives a detailed understanding of them and a comparative overview of their present position with a focus on their past and prospects of investment.

Historical Background

The Iraqi Dinar

The Iraqi Dinar has been in circulation since Iraq gained its independence from Great Britain in 1932, as it replaced the India Rupee colony currency. Concerning the changes that occurred over the years, the most significant experiences were during the Gulf War and more so during the invasion of Iraq by the American forces in the year 2003. This led to economic sanctions and a consequent deep depreciation of the currency.

After 2003, the Central Bank of Iraq put into circulation newly designed Dinar notes with increased security to foster economic stability. This however is an illusion and as such the currency continues to be undervalued due to political instability and a dependence on oil exports.

The Vietnamese Dong

The Vietnamese Dong has been in circulation for 60 years since it was initially introduced in 194 in Vietnam during the early fight for freedom. There is a fact that, from time to time, the Dong has been redevised gradually, especially after the reunion of two Vietnam in 1978. The currency unit of this country has been relatively low for a long time due to the country’s economic classification as a developing nation.

Vietnam has been transforming gradually from a centrally planned economy which was to a market-oriented economy, this has made the Dong more stable. Vietnam is presently well recognized for its strong industrial base and growing export-oriented economy, which has played a part in favor of the Dong.

Economic Drivers

Iraq’s Economy

Having over 90% of the government’s income from oil, the economy of Iraq is highly centralized. However, this makes the Dinar dominated by global oil prices, unimaginable reserves in Iraq point to a fairly huge economic prospect.

Nevertheless, political instabilities, corruption, and poor transport infrastructure have remained a push factor to the diversification of the economy. The post-conflict rebuilding of the country has been shoddy which has exacerbated investor skepticism and the Dinar exchange rate.

Vietnam’s Economy

Vietnam’s economy is not solely dependent on exports but rather developed in manufacturing, agriculture, and tourism. It exports many goods, such as textile products, electronic products, and agricultural products.

However, compared to Iraq, Vietnam has had fairly political stability, which has encouraged the flow of free capital investments. Vietnam has adopted a free market economy as the central policy since ‘Doi Moi’ economic reforms were introduced in the mid and late 1980s. This has helped to ensure that Dong continues to appreciate, although it has a low level of inflation.

Current Exchange Rates and Trends

Iraqi Dinar (IQD)

The current exchange rate is 1 USD 1,317.33 ID. Its stability in the recent past has been, for the most part, driven by the Central Bank of Iraq interventions. The following interventions, such as maintaining large foreign currency reserves and conducting monetary policy measures, have reduced sharp up-and-down fluctuations. Nonetheless, as it depends on the stability of the oil income and governmental efficiency in managing economic risks, the Dinar is fairly vulnerable.

Vietnamese Dong (VND)

According to the current exchange rate, the Dong is equivalent to 25,318 VND to 1 USD. As mentioned earlier, it has a significantly lower face value as compared to the Dinar, but Dong has been gradually appreciating against most currencies due to growth in Vietnam’s economy. Such growth is supported by the expanding export market, increased FDI, and sound trade liberalization. The managed float policy of the SBV does not deviate too far from the policy while making the currency respond to other macroeconomic factors, so Dong is a more stable currency in which to invest.

Investment Potential

Investing in the Iraqi Dinar

Due to efforts to restore it as a foreign exchange reserve, the Iraqi Dinar has become a hot cake for speculative investors, especially those waiting for its revaluation. Some analysts and politicians think that improvements are attainable because of Iraq’s oil revenues and possible economic liberalization.

However, investing in the Dinar carries substantial risks:

Volatility

Due to the volatile security and political situation in Iraq, this currency is one of the most volatile around the globe. Over the past three decades, Iraq has experienced conflict, international embargo, and internal violence, which all affect the unit value of its currency. A stable political and economic situation in any country is a definite positive thing because investors are therefore protected from sharp value devaluation of the currency. However, the Dinar is not stable, and its value can be highly unpredictable and vulnerable, which is not good news for anyone trying to make a consistent profit from foreign exchange, especially when they have invested in the Dinar.

Limited Convertibility

The Iraqi Dinar cannot be purchased by foreign clients in the global Foreign Exchange market thanks to its extremely low availability. None of the dealers, in most cases, is willing to provide direct quotations for Dinars, and most of the time, investors have to search for specialized dealers who deal in such or engage in private transactions to buy or sell Dinars. This fact makes it less accessible to investment and brings issues of fraud or overly high premiums into the picture.

Uncertain Revaluation Prospects

So, one of the main reasons investors may cite for investing in the Dinar – the possibility of its revaluation – still seems more or less remote. The restoration of the value would need significant economic changes, stability, and a rich economy, which are the country’s future objectives. When and to what degree all of this might happen is unclear, which only brings the idea of investing in the Dinar as more closely aligned with speculation than a wise investment plan.

Investing in the Vietnamese Dong

The Vietnamese Dong is often viewed as a safer investment compared to the Dinar. Vietnam’s stable political environment and growing economy provide a more predictable outlook. Investors are drawn to:

Economic Growth

Vietnam’s GDP is continuing to grow much higher than many emerging markets. In the last decade, industrial development, the export sector and gradually growing domestic demand have sustained a high growth path for the country. Here the economic force has played a key role in improving investor confidence and for Dong’s gradual appreciation.

Trade Partnerships

Free trade agreements that the country is involved in improve its economy. Vietnam has acceded to numerous trade agreements; current free trade agreements are the Trans-Pacific Partnership (TPP), revamped as the CPTPP, and the RCEP. These affect enhance Vietnam’s export capacity, fortify its manufacturing sector, and give the country FDI, all of which are beneficial to the Dong.

Currency Stability

Slowly and steadily rising Dong indicates the fact that underlying economic conditions in Vietnam are strengthening. This actual flow of policy of the State Bank of Vietnam has been quite useful in performing this dual role of controlling the stability of the currency and, at the same time, responding to the fluctuations in the market. It lowers unequal fluctuations and helps Dong maintain adequate synchronization with the country’s high economic growth.

Nevertheless, threats like Inflation and dependence on exports are dangers facing the Dong and may affect its value.

Currency Market Dynamics

Global Perception

Hopes and expectations of people of the whole world affect the valuation of the IQD and VND. The Dinar is also associated with Iraq’s struggling political environment that repels most conventional investors. On the other hand, Vietnam’s image as a burgeoning manufacturing power helps the Dong.

Government Policies

Iraq: The Central Bank of Iraq has used certain techniques to control the Dinar, such as controlling inflation and maintaining foreign currency reserves. However, he added that underlying reforms in the economic landscape are still necessary to support investor confidence.

Vietnam: The Dong uses the practices of managed floating exchange rate since the State Bank of Vietnam is in charge of the currency. The government is actively encouraging investment from overseas, and similar policies will continue to augur well for Dong’s future.

Key Takeaways

Similarities

Merging market Currencies

The IQD is the currency of a country that is considered an emerging market, and so is the VND. Iraq and Vietnam are considered countries with emergent economies that are predominantly dependent on certain types of industries, the main of which in Iraq could be considered an oil industry, while in Vietnam, it could be manufacturing and agriculture. At some point, we find that their currencies are a reflection of the economic uncertainty and future opportunities of these markets.

Managed Exchange Rate Policies

Unlike most other currencies that are floated in the foreign exchange market, both currencies are manipulated by respective central banks. The Central Bank of Iraq affects IQD’s exchange rate to stabilize the economy, and The State Bank of Vietnam manipulates the VND’s value to fund local exports and also curb the inflation rate.

Low Nominal Values

Both currencies are characterized by relatively low nominal values against major global currencies like the US Dollar. For example, the exchange rate for the VND is in the thousands or tens of thousands per USD, while the IQD, though not as extreme, also trades at a low nominal value compared to stronger currencies.

Currency Devaluation History:

The IQD has been greatly devalued in the past, while the VND has also been devalued at one point or another. After the Gulf War in the early 1990s and the ensuing sanctions, the value of IQD went down considerably. Likewise, similar inflation and devaluation were realized in the VND during the early 1990s and the liberalization of the Vietnamese economy. They have determined their present exchange rate systems and the markets’ impressions regarding them.

Differences

Economic Foundations:

The Iraqi Dinar has a significant connection with Iraq’s in which is over 90% dependent on oil sales. As for the Vietnamese Dong, the economy behind it has been more diversified, with manufacturing, agricultural sectors as well as technology exports. Vietnam’s economy is more diversified than that of Iraq which greatly depends on a specific sector.

Global Trade Integration:

Vietnam is heavily connected with the international market, mainly through exports. Since it has VND as its official currency, it exports electronics, garments, and agricultural products. Through participation in different FTAs, the Vietnamese Dong has an advantage. Iraq, on the other hand, mostly exports petroleum, and the IQD is much less used in the international Foreign Exchange Market outside of the petroleum business.

Inflation and Currency Value Trends:

Vietnam’s currency, the VND, has steadily been devalued over the years as the country looks for ways to compete in export markets. On the other hand, the IQD has undergone revaluation and is comparatively more stable because Iraq strives to support a fixed exchange rate, mainly because of the impact of oil prices. This makes it less volatile compared to the VND, whose rate of exchange is far more often due to market forces.

Monetary Policy Framework:

The Central Bank of Iraq and the State Bank of Vietnam work on different structural plans for monetary policies. The Central Bank of Iraq’s policies are primarily dictated by post-conflict stability and control over the oil revenues. The State Bank of Vietnam, on the other hand, is concerned with exporting competitiveness and controlling inflation within a fast-growing economy, often utilizing instruments such as interest rates and foreign exchange reserves. This has been evident in the way each country has set its monetary policy to suit the economic problems that prevail in each country.

Conclusion

The periods under consideration present two quite different stories in the global currency market: the Iraqi Dinar and the Vietnamese Dong. Ways forward for the Dinar greatly depend on the stability of the political situation and the development of a more diverse economy for Iraq. Unlike Dong’s slow ascent, which signals his poor economic forecasts and Vietnam’s sluggish economic performance, Dong’s gradual appreciation reflects Vietnam’s economic liberalization and high growth capability.

It is, therefore, important that any potential investor understand the contexts in which these currencies operate. Thus, the Dinar provides an opportunity to receive high risks and high results, and the Dong is more stable but has less perspective for investment. Of course, as with any other transaction involving acquiring an asset, profound analysis and risk assessment are the keys to achieving success.