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While there are 180 currencies currently in circulation globally, they aren’t all created equal. Some have incredible purchasing power on the world stage, including many unfamiliar to the average forex trader. In this article, we’ll rank ten of the world’s strongest currencies, exploring the reasons behind their strength and their value relative to the US dollar.
Exchange Rate: 1 KWD = 3.26 USD
Created in 1961 after Kuwait gained independence from the United Kingdom, the Kuwaiti dinar (KWD) has long held its position as one of the strongest currencies in the world. This title can be attributed to several factors, including the small but wealthy nation's vast oil reserves. Its value is pegged to an undisclosed weighted currency basket.
With approximately 10% of the world's oil reserves, Kuwait's economy heavily depends on oil exports, which account for over half of its GDP and about 90% of government revenues. This oil revenue has allowed Kuwait to maintain a strong fiscal position and accumulate substantial foreign exchange reserves.
The country's stable economy is another significant factor contributing to the KWD's exchange rate. Kuwait has managed to maintain low inflation and unemployment rates thanks to its prudent fiscal policies and well-regulated financial sector.
Exchange Rate: 1 BHD = 2.65 USD
The Bahraini dinar (BHD) is the second-strongest currency in the world, closely following the Kuwaiti Dinar. Bahrain, a small island nation in the Persian Gulf, has a diverse economy that relies on oil production and other sectors like finance and tourism. The value of the BHD has been pegged to the US dollar since 1987.
Like Kuwait, oil has played a significant role in Bahrain's economic growth and contributes to the strength of the BHD. The country is home to one of the first oil fields discovered in the Gulf region, and its petroleum industry still makes up as much as 85% of Bahraini budget revenues.
However, Bahrain has been working to diversify its economy, and as a result, it has developed into a regional financial hub. The country's well-regulated financial sector, which includes Islamic finance, insurance, and asset management, adds value to the BHD.
Exchange Rate: 1 OMR = 2.59 USD
The Omani rial (OMR) is a powerful currency in the global market, thanks to a combination of factors that bolster its strength. Oman, located on the southeastern coast of the Arabian Peninsula, has a rich trade history and has managed to maintain its currency's value through prudent economic policies and diversification efforts. Like the BHD, the OMR is pegged to the US dollar and has been since 1973.
Like its aforementioned Middle Eastern neighbours, Oman's oil exports have been a key driver behind the OMR’s strength. While the country has smaller oil reserves than many countries in the Middle East, oil still accounts for much of its revenues, making up 62% of its total exports. Natural gas production has become more prevalent in recent years, growing to 8% of Oman’s exports.
To diversify and reduce its dependence on oil, Oman launched Vision 2040, emphasising investment in areas like tourism, agriculture, and manufacturing. Alongside the country’s political steadiness and close relations with neighbouring countries, these efforts have contributed to the OMR's strong exchange rate.
Exchange Rate: 1 JOD = 1.41 USD
The Jordanian dinar (JOD) is the national currency of Jordan and consistently ranks as one of the strongest currencies in the world, despite the country's relatively small size, lack of natural resources, and large amounts of foreign debt. Unlike the previous nations, Jordan is classified as an emerging market economy, which makes the JOD’s strength somewhat of a mystery.
However, there are some explanations behind its strength. One is Jordan’s stability in a region often marred by turmoil. Jordan is highly regarded for its political stability and security, allowing it to focus on economic development and promote strong relationships with international partners.
The financial sector also plays a crucial role in supporting the strength of the Jordanian dinar. The Central Bank of Jordan closely monitors and regulates the nation's banks and financial institutions, with its banking sector widely considered internationally advanced.
Arguably, the JOD’s peg to the US dollar, established in 1995, has been the biggest contributor to its strength. While the peg resulted in a substantial loss of control over monetary policy, it has helped maintain the country's financial stability and attract deposits from neighbouring countries.
Exchange Rate: 1 GBP = 1.25 USD
The British pound (GBP), also known as the British pound sterling, is a long-standing contender for one of the world's strongest currencies. Its strength can be traced back to the historical influence of the British Empire, which once spanned across the globe. Today, the pound is sustained by a variety of factors, including the United Kingdom's global influence and its thriving financial services sector.
The UK holds a prominent position in international politics. Its membership in organisations such as the G7, the United Nations, and NATO contributes to the nation's influence on the world stage. This prominence translates to a degree of confidence in the GBP since investors perceive it as a reliable currency.
The pound is the oldest currency still in use, accounting for approximately 13% of the global forex market’s daily trading volume. London, the nation’s capital, is considered a global financial hub, hosting a wide range of banks, insurance companies, investment firms, and other financial institutions that all help to buoy the pound’s value.
Exchange Rate: 1 GIP = 1.25 USD
The Gibraltar pound (GIP), a unique currency, shares the strength of the British pound due to a one-to-one exchange rate as a British Overseas Territory. While the GIP retains a near-identical relationship with the GBP, using similar notes and names, GIP banknotes aren’t accepted in the UK. Interestingly, however, coins and banknotes issued by the Bank of England are legal tenders in Gibraltar.
Despite being a relatively small island, Gibraltar has created a diverse economy, with financial services, tourism, and navigation being key sectors. Gibraltar has established itself as an important economic hub, attracting international businesses with its low tax rates, robust regulatory framework, and strategic location at the entrance of the Mediterranean Sea. This combination of a strong economy and peg with the British pound has helped make GIP one of the world’s most valuable currencies.
Exchange Rate: 1 KYD = 1.21 USD
The Caymanian dollar (KYD), also called the Cayman Islands dollar, is the official currency of the Cayman Islands. Tucked away in the Caribbean Sea, the Cayman Islands have long been renowned for their attractive tax regime and reliable political environment, making them a popular destination for offshore banking and financial services. Like several currencies on this list, the KYD is pegged to the US dollar.
The financial services and tourism sectors comprise roughly 50-60% of the country’s GDP. The territory hosts numerous banks, hedge funds, and other financial institutions, bolstering the local economy and supporting the KYD's strength.
Given the Cayman Islands’ association with wealth, it’s unsurprising that they host luxury resorts, high-end retail experiences, and fine dining options. The territory’s stunning beaches and world-class scuba diving sites also play a large role in its tourism sector, helping to sustain the local economy and the value of the Caymanian dollar.
Exchange Rate: 1 CHF = 1.11 USD
The Swiss franc (CHF) is the native currency of Switzerland and Liechtenstein. Switzerland, and by extension, the Swiss franc, is considered a safe haven due to the country’s historic neutrality and political stability. Sound economic policies and status as a global financial centre have also strengthened the CHF considerably.
Switzerland’s efforts to maintain neutrality, security, and a solid regulatory framework have contributed to an environment that fosters growth and encourages foreign investment. The Swiss economy is well-diversified, with key sectors including manufacturing, pharmaceuticals, technology, and tourism. It also runs a surplus, meaning the nation’s income exceeds its expenses.
The Swiss National Bank is regarded as one of the world’s leading central banks, employing conservative monetary policy to keep inflation low and ensure price stability. Moreover, many of the world’s leading financial institutions reside in Switzerland. Despite recent controversy, UBS and Credit Suisse have long been considered two of the world’s most influential banks.
Exchange Rate: 1 EUR = 1.1 USD
The euro is the official currency of the Eurozone, which includes 20 of the 27 European Union member states. The strength of the euro can be attributed to its member countries' combined economic power, the European Central Bank’s (ECB) reliability, and the single market. It is the second most traded currency after the US dollar.
The Eurozone's combined economy is one of the largest and most diverse in the world, with industries such as manufacturing, technology, finance, and agriculture contributing to its overall strength. The euro benefits from this economic diversity and the trade facilitated by the EU's single market, which promotes the free movement of goods, services, capital, and labour.
The ECB has long been committed to low inflation and promoting economic growth in the region. It considers transparency and an independent decision-making process vital to its monetary policy, which has fostered confidence in the Euro as a stable and secure currency.
Exchange Rate: 1 USD = 1 USD
The US dollar (USD) is not only one of the strongest currencies in the world but also serves as the world's primary reserve currency. Its prominence can largely be attributed to the United States’ economic dominance, influence on the world stage, and its robust financial system. It is the world’s most traded currency, accounting for 88% of all trades in the forex market in 2022 (Bank of International Settlements).
Some of this trading volume can be explained by the USD’s use as the “petrodollar.” While most of the world’s oil is produced outside the United States, the global oil market is priced in USD. This means that foreign oil exporters are paid in US dollars, which results in these exporting nations building up reserves of USD that can then be traded for local currency. Consequently, the USD’s status as a globally accepted reserve currency vital to the oil market has helped to support its value over the past few decades.
The US also boasts the world’s largest economy, with substantial financial, technology, and manufacturing sectors. This strong and diverse economy has led to increased demand for US goods and services, further boosting demand for the US dollar.
While currency trading may seem daunting at first, the concept is simple. Traders buy one currency and sell another, aiming to profit from changes in the exchange rate between the two. Here's a brief guide to trading currency pairs:
The Swiss franc is often considered the safest currency due to Switzerland's political stability, strong economy, and conservative monetary policy.
The most stable currency can vary, but the US dollar and Swiss franc are typically considered among the most stable due to their respective economic and political strengths.
The Kuwaiti dinar is strong primarily because of the country's substantial oil reserves, stable economy, and peg to the US dollar.
The world's weakest currency can fluctuate over time due to economic and political factors. Historically, currencies such as the Iranian rial, Zimbabwean dollar, and Venezuelan bolívar have been among the weakest.
The most popularly traded currencies include the US dollar, euro, Japanese yen, British pound, and Chinese yuan. These currencies accounted for $11.682 trillion of forex trade daily in 2022 (Bank of International Settlements).
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