When U.S. and British forces took control of Iraq, some officials speculated that Iraqis might burn their money, destroying its smiling visage of Saddam Hussein in a well-tailored suit. But the Iraqi currency is still alive and almost well, fluctuating hour by hour against the dollar and other regional currencies in wild exchanges in every currency market in the country.

"Money is money," said Qassir Muhammad Ali, a civil engineer from the southern Iraqi oil fields. Ali said Iraqis do not care whose face is on the money, as long it maintains its value. "Mickey Mouse? George Washington? Saddam Hussein? Whoever."

Amid the gyrating exchange rates, some Iraqis have lost their shirts while others have made small fortunes. "It is like your stock market," said Jamal Zianel, who runs a currency exchange in the chaotic old market of Basra. "You play the market minute by minute."

Rumors have driven the dinar up in the morning only to send it down in the afternoon -- or vice versa.

For instance, thousands of teachers in the south-central provinces, a three-hour drive north of Basra, heard recently that they would be paid $20 cash stipends by the Americans, and the value of the dinar went up. More dollars in circulation, they reasoned, meant a greater demand for dinars to spend. Dollars have also flooded into the markets from foreign aid workers, journalists and occupation troops, adding to the upward pressure on the dinar.

The formula has worked the other way, too, in the seven weeks since Hussein's government collapsed. The dinar sank last month, for example, when U.S. occupation authorities found about $250 million worth of dinars in a basement vault in the Central Bank in Baghdad.

In a large closet under a stairwell, cooled by a rackety air conditioner that circulates second-hand smoke, Zianel operates his exchange. He looks like Billy Joel, favors blue jeans and bright shirts and says he counts money in his sleep instead of sheep. His overhead includes a scale to weigh the money, a pair of squat safes -- one dating from the British occupancy early in the last century -- and three employees who work the streets with plastic bags filled with cash.

The enterprise, which moves about $10,000 a day, is protected by an old Smith & Wesson pistol -- and something more powerful.

"The mafia!" he said, explaining that money changers know one another, they are all armed and if a bank robber attempted a heist, "he would need a tank."

His phone rang. In fact, during an interview, Zianel's phone rang every few minutes with calls from local merchants who wanted to know the exchange rate. The merchants depend on him because if they are selling a big-ticket item -- a Chinese television set, an Indian bicycle, a truckload of Ecuadoran bananas -- they need to know what the items are worth in dollars and dinars.

Business these days is brisk. In came an out-of-work teacher who needed to exchange $20 for dinars to shop for food and other essentials. Another customer, a local trader, sent in an associate with wads of $100 bills to buy dinars to pay his employees. The man left with a bag so heavy that it took two men to carry it away.

A gas smuggler stopped by to ask Zianel about the day's rumors and rates. His trade is strictly in dollars, although he might trade whiskey for gas with the Kuwaitis, he said.

While dinars are the currency of the streets, dollars have long been the currency of commerce, before the war and today. Smugglers insist on greenbacks, as do foreign companies exporting to Iraq everything from Jordanian cars to Sri Lankan underwear.

"Dollars or dinars, who cares? As long as it's stable," said Khalib Kubba, who owns the Commercial Bank of Iraq branch in Basra, which has been closed since the war.

On Thursday, the morning's exchange rate was 1,270 dinars for $1. It had been 1,150 on Tuesday. That marked a dramatic rise from recent years. In the 1990s, the dinar traded at 1,500 to 2,000 per dollar. In years past, it cost 3,000, sometimes 4,000 dinars, to buy a dollar, and it hit similar highs during the panic surrounding the recent war.

Then in the first weeks of occupation, with everyone sticking close to home, it cost only 800 dinars to buy a dollar.

The ubiquitous currency of Iraq is the light-blue 250-dinar note. Worth about 20 cents at current rates, one note buys a bag of bread or a shoeshine. Lunch at a good restaurant, for a party of four, runs about 25,000 dinars, which is paid in thick wads held together with a rubber band.

Iraqis generally do not trust banks. After three wars, waves of rebellion and repression, and a decade of U.N.-imposed economic sanctions, they prefer to remain liquid. It is one source of their resiliency. Iraqis with some savings prefer to keep their money at home, hidden and in dollars. They buy dollars themselves, and they also receive them from relatives working overseas.

But in interviews, many Iraqis said they hoped they would not abandon their own currency, although they want to see it stabilized. Ultimately, the occupation authority or the new Iraqi government plans to begin issuing new dinar notes, without Hussein's face.

There is a more immediate problem, however. In the months before the war, the Iraqi treasury went on a money-printing spree and issued truckloads of 10,000-dinar notes. Nobody likes them, as the bills come in slightly different shades of green and yellow, and the serial numbers often appear smudged or even absent, signifying likely counterfeits. As a result, they are generally worth only about 75 percent of their face value.

U.S. officials have suggested that they might offer to buy the 10,000-dinar notes and exchange them for 250-dinar notes to prop up them up. But that, too, could send the dinar bouncing up and down again.

This is not a trivial matter, explained Zianel, the money trader. Every dinar counts in a country where a teacher's salary, before bonuses and other perquisites, might equal $10 or $20 a month, he said as his phone kept ringing.

Iraqis in Basra try to exchange their 10,000-dinar notes, which are often worth only 75 percent of the face value.