Jordanian Dinar (JOD)

What Is the Jordanian Dinar - JOD?

The national currency of Jordan is the Dinar. The currency abbreviation or currency symbol for the Jordanian Dinar is denoted by JOD. The dinar has smaller denominations or subunits. In particular, one dinar is equal to 10 dirhams, 100 qirshes, and 1,000 fils. The dinar is also circulated on Israel's West Bank.

The Jordanian Dinar Explained

The dinar became Jordan's official currency in July 1950. It replaced the Palestinian pound, a currency which had circulated in the British Mandate of Palestine and the Emirate of Transjordan, a British protectorate, since 1927. After independence, the country created the Jordan Currency Board to issue and circulate currency. 

The Central Bank of Jordan (CBJ) took over production and monetary policy in 1959. Issued have the official name of the country, the Hashemite Kingdom of the Jordan, printed on them. The current, fourth series of banknotes issued by the CBJ have denominations of 1, 5, 10, 20, and 50 dinars. Dinarian coins were denominated in Arabic until 1992 and then changed to English. The dinar has been pegged to the U.S. dollar for the past twenty years.

The country of Jordan pegged their local currency to the U.S. dollar to create stability in their financial system. Typically, if a country's currency exchange rate fluctuates wildly, it's difficult to attract foreign investment, and capital flows might leave the country in search of more stable investments.

By pegging the dinar to the dollar, Jordan gets the benefit of a stable currency regime, meaning their local banks are likely to attract deposits. A stable currency also leads to increases in foreign direct investment into Jordan. By pegging to the dollar, however, the Jordanian central bank cannot try to affect the value of its currency on the open market in response to changing economic conditions such as a recession or overheated growth. Likewise, if the U.S. dollar gains or loses strength due to American economic circumstances, that can change the buying power of the dinar even though the situation in the Jordanian economy may be quite different.

Real World Example of the Jordanian Dinar

The JOD is pegged to the U.S. dollar at a fixed exchange rate of 0.7090 for every dollar. For example, let's say you were sending a wire transfer to Jordan and wanted to convert $1,000 to dinars. The exchange would result in 790 Jordanian dinars. Because it is pegged this exchange rate will persist over time, as opposed to currencies that float in the market and so change their exchange rate over time.