Currencies are unique to the countries they are recognized in countries where they are declared legal tender. Different currencies around the world have different values in the global market. Today we have over 175 different valuable currencies around the world.
The value of these currencies varies from time to time. This can be attributed to factors such as political stability, business policies, climate conditions, etc.
In this article, we have taken our time to not only list some of the most valuable currencies in the world but also made sure to explain what currencies are best for what type of trade. As a bonus, we have given outlined illustrations to explain why these currencies are best for whatever trade.
Also Read: Currency Risk: A Complete Guide
Contents
Top 10 Strongest Currencies in the World
Most people assume that because the US Dollar and the European Euro (EUR) are the most popular currencies, they are also the world’s strongest currencies. However, this is far from the truth. In reality, we have several currencies that are much stronger than the two.
We have listed them down from the strongest to the weakest, with a focus on the 10 highest currencies in 2021. We have contrasted them to the US Dollar and the Euro as the fixed base currency.
1. Kuwaiti Dinar (KWD)
The Kuwaiti Dinar is the worlds’ highest currency. Yes, you read that right! At the time of writing;
1 KWD = 3.30 USD
1 KWD =2.91 EUR
It is the official and national currency of Kuwait. The value of the Kuwait Dinar could be explained by the country’s oil economy. Kuwait alone produces and exports about 10% of the world’s oil. This is their major export and represents about 95% of Kuwait’s total revenue. It can also be attributed to the country’s tax-free economy.
Kuwait also ranks among the top 10 countries in the world with the highest GDP per capita. The Kuwait Dinar was initially pegged to the US Dollar but in mid-2007 their government decided to peg it against the weighted currency basket.
2. Bahraini Dinar (BHD)
The Bahraini Dinar is the official national currency of Bahrain. It is the world’s second strongest currency. At the time of writing:
1 BHD = 2.65 USD
1 BHD = 2.30 EUR
Today the economy of Bahrain is largely driven by the export of gas and petroleum products. However, before it become a world leader in terms of petroleum production Bahrain’s main industry was pearl mining.
This alone accounts for why the country’s currency is this valuable considering Bahrain has a population of fewer than 2 million people.
It is important to note that Bahrain has two currencies recognized by their government; the Bahrain Dinar (BHD) and the Saudi Riyal.
1 Bahrain Dinar is equal to 9.96 Saudi Riyal
3. Omani Rial (OMR)
Image from Wikipedia Commons
The Omani Rial is the official currency of Oman, a country Arabian Peninsula. It is the third most expensive currency in the world. At the time of writing:
1 OMR = 2.60 USD
1 OMR = 2.29 EUR
The Oman government decided to peg their currency against the US Dollar in 1973. It has grown to be so strong that at some point the government had to print ½ and ¼ Riyal banknotes in a bid to sustain cash flows in the economy.
4. Jordanian Dinar (JOD)
The Jordanian Dinar is the official currency and legal tender for Jordan. At the time of writing:
1 JOD =1.41 USD
1 JOD =1.24 EUR
Jordan is an Arabic country but unlike its neighbors’ it is not so rich in oil and petroleum products. The value of the Jordan Dinar is maintained by;
- The government of Jordan is strict on the policies surrounding forex exchange. They do not allow their currency to be weakened by trading with another currency that would cause this to happen.
- The Jordan Dinar is and has been pegged to the US Dollar for the past two decades.
Both of these factors have helped the currency to maintain its value over time.
5. British Pound Sterling (GBP)
The British Pound Sterling is considered the official currency and legal tender for England, Wales, Northern Island, and Scotland. At the time of writing:
1 GBP =1.33 USD
1 GBP =1.17 EUR
As you may have already noticed the British Pound Sterling is the most valuable currency located outside of the middle east. For this reason, and because it is popular it is often confused for the strongest currency in the world.
Its value is largely derived from the fact that it is one of the oldest currencies to exist independently. Also, as you have seen above it is used in several countries hence the high value.
However, in the recent past, the United Kingdom, which was part of the European Union left the Union. This had a significant effect on the value of the British Pound Sterling.
6. Cayman Islands Dollar (KYD)
The Cayman Islands Dollar is the national currency and legal tender for the Caribbean Cayman Islands. It is the only Caribbean currency in this list. At the moment;
1 KYD =1.20 USD
1KYD =1.06 EUR
The KYD can maintain its value mainly because the Caymans are notorious tax havens. This encourages investors from other countries to bank their money in the Caymans. This leads to a lot of liquidity in the economy and hence strengthening the Cayman Island Dollar.
The value of the KYD can also be said to be high because of all the foreign business in the economy. The Cayman Islands is home to some of the largest hedge funds, insurance companies, and reputable commercial banks.
7. European Euro (EUR)
The European Euro is the official currency and legal tender for the European Union. At the time of writing;
1 EUR = 1.13 USD
The European Union boasts of 28 member states. Of the 28 states, 19 recognize and use the Euro as their legal tender. The widespread use of the Euro mainly drives its value.
Interestingly, the Euro was initially a virtual currency. It helped facilitate trade between members of the European Union in form of cheques and electronic bank transfers. Today, it is among the most traded currencies.
The Euro is the second most traded currency in the world presently. It follows the US Dollar closely.
8. Swiss Franc (CHF)
The Swiss Franc is the official currency and is considered legal tender for Switzerland and Lichtenstein. At the time of writing;
1 CHF = 1.09 USD
1 CHF = 0.96 EUR
Like Jordan, the Swiss and Lichtenstein governments’ have put in place strict policies and trading guidelines that ensure the value does not fall significantly. This alone has made Switzerland one of the richest countries.
Switzerland boasts of an excellent banking and finance industry. It is among the top ten countries with low external debt. This makes the Swiss Franc very attractive to investors as a storing currency. This is mainly for investors who want to store their wealth for the long-term.
9. US Dollar
Finally, on number nine is the United States Dollar (USD). It is the most traded currency in the world. It is the official currency and considered legal tender for the US as well as in several other sovereign and independent states.
1 USD = 0.88 EUR
The fact that it is the most traded currency in the world contributes largely to its growth in value. It is also recognized as the world’s primary reserve currency. If you were to walk into various central banks around the world, chances are they will have some US Dollars in-store.
10. Canadian Dollar (CAD)
The Canadian dollar is the official currency and is recognized as legal tender in Canada. At the time of writing:
1 CAD = 0.78 USD
1 CAD = 0.69 EUR
CAD can maintain its value because of two major reasons;
- It is among the top ten reserve currencies in the world. It is actually the sixth most traded currency in the world presently.
- It is among the top ten most traded currencies on the forex market daily.
Canada also boasts of being one of the major Uranium suppliers in the world. The country also boasts of a healthy crude oil reserve.
What Currency to Use and Why
From the list above you have seen different types of world currencies and the factors that drive them. It follows that while trading in different financial markets and industries some currencies are better suited than others. This is attributable to the specific country and currency characteristics.
Forex Trading
While trading in the forex market it is advisable to use currencies such as the US Dollar, European Euro, British Pound Sterling, or the Canadian Dollar. This is because these currencies are popular and have been accepted as daily commodities in the currency market.
These currencies have also been accepted and recognized among the world’s reserve currencies. This means that they are accepted or can be converted from anywhere in the world on the go. As forex is usually traded in currency pairs some of the most traded currency pair(s) are USD/GBP, EUR/USD, and EUR/GBP.
Also read: Best Forex Trading Platform 2022
Oil and Petroleum
If you intend to invest in the petroleum industry you would ideally opt to use the Kuwaiti Dinar, Bahraini Dinar, or the Omani Rial. This is because most countries that trade in oil would be more than glad to get the said currencies because of their high value.
Also, the exchange rate between different countries and the above-mentioned countries varies from time to time. Therefore, if you purchase the said currencies at an early stage when the value is low, you stand to make a killing if and when their value increases.
Imports and Exports
While importing and exporting goods globally, the best currency to use would be the US Dollar. This is mainly because it is the world’s reserve currency and is recognized globally. As a bonus, other sovereign states recognize the US Dollar as their legal tender.
For traders in Europe, your best bet would be the Euro. This is for the most obvious reason that it is the official currency of the European Union.
Storing Wealth
If you intend to store your wealth the best bet would be using either the Cayman Dollar or the Swiss Franc. Both of these currencies are stable currencies and fluctuate within a very small range.
Also, in both countries where the above currencies are recognized as legal tender, the banking and finance industry is strong and encourages the growth of your money. The policies surrounding the Swiss Franc and the Cayman Dollar are also favorable for storing wealth for extended periods.
FAQs
What does it mean when one currency is stronger than the other?
When a currency grows to be stronger than another it is said to purchase more of the weaker currency than it did before. Stronger currencies are attractive as they have more purchasing power, especially in weaker economies.
What is the weakest currency in the world?
Currently, the weakest currency in the world is the Iran Riyal. Compared to the US dollar it is the weakest currency. It is so weak that Iranians transact with a minimum of 10 Iranian Riyal. 10 Rial is equal to 1 Toman, which is the smallest unit of their currency.
Is investing in foreign currency a good idea?
Currencies fluctuate from time to time due to various market conditions. If you can be able to predict or speculate these price movements then investing in foreign currency could be a great venture. Investing in foreign currencies is usually done in a forex market. The term forex is used to mean foreign exchange market.
Is a strong currency a reflection of a strong economy?
Yes, a strong currency is one of the major indicators of a strong economy. Strong currencies limit the price increase and lower the cost of taking credit because the interest rates are low, hence inflation is low.
