There are currently about 180 fiat currencies recognized by the United Nations as the legal tender of various territories. These currencies differ in their value in local trade and how they exchange against other currencies from other countries. But how is this value determined and what is the strongest currency in the world? This article ranks the highest currency in the world and explains the economic factors that influence currency strength.
What Defines the Strength of a Currency?
So what really defines the strength of a currency? To determine what is the strongest currency in the world, we have to understand the factors behind a currency’s true value. Generally, the strength of any currency is determined by a wide range of factors. The most valuable currency in the world is determined by factors like the economic and political stability of the country, interest and inflation rates, balance of trade, foreign exchange reserve and the country’s debt level.
Top 10 Strongest Currencies in the World – Comparing the Most Valuable Currencies
Some currencies like the United States Dollar and the British pound are the most traded globally. Interestingly, these currencies aren’t the strongest in the world. Here’s a ranking of the top 10 strongest currencies in the world and the factors that make them so powerful:
1. Kuwaiti Dinar
The official legal tender of the West Asian State of Kuwait is the most powerful currency in the world, with one Kuwaiti Dinar worth 3.26 USD. The country is one of the leading global exporters of crude oil. The currency’s value is further backed by the Kuwaiti government’s prudent management of its financial resources and excellent fiscal policies.
2. Bahraini Dinar (BHD)
Like Kuwait, the island nation of Bahrain earns most of its wealth from exporting oil and gas. However, in recent years, Bahrain has also evolved into a financial powerhouse and famous tourist destination. The Bahraini Dinar is currently the second strongest in the world, with one BHD worth 2.65 USD.
3. Omani Rial
Oman is another oil-rich country located in the Arabian Peninsula. One Oman Rial is currently worth 2.60 USD. In recent years, Oman’s non-oil exports have been increasing steadily as well, further boosting the strength of its currency.
4. Jordanian Dinar
One Jordanian Dinar is currently worth 1.41 USD, making the JOD the fourth strongest currency in the world. This is impressive for a country that isn’t as strongly dependent on oil exports as its neighbors. The strong value of the Jordanian Dinar is tied to the country’s strong fiscal policies and political stability despite being located in one of the least stable regions in the world.
5. Great Britain Pound
The Great British Pound is the oldest currency in the world that is still in use today. This free-floating currency is not pegged to any other currency. One GBP is currently equivalent to 1.30 USD. The strong value of the GBP isn’t surprising considering it is currently the sixth-largest economy in the world in terms of Gross Domestic Product (GDP). It is also one of the most stable currencies in the world thanks to Great Britain’s political stability and robust economic policies.
6. Gibraltar pound
The Gibraltar pound or GIP is tied with the GBP in terms of its value. In fact, both currencies are used interchangeably in Gibraltar. The country is renowned all over the world as a financial hub. Gibraltar’s economy is sustained by tourism, online gaming and its role as a significant port country in the Mediterranean Sea.
7. Cayman Islands Dollar
The Cayman Islands is a major offshore financial center renowned as a hub for international banking and investments. The Cayman Islands Dollar remains one of the strongest currencies in the world exchanging at a rate of 1.20 to the USD.
8. Swiss Franc
The official currency of Switzerland and Liechtenstein is the 8th strongest currency in the world, with a value equivalent to 1.16 USD. It is a pretty stable currency thanks to Switzerland’s political stability and wealth.
9. Euro
The Euro is the official currency of the countries in the Eurozone – A coalition of 20 EU countries including France, Spain, Germany and others. It is the second most traded currency in the Forex market, only surpassed by the US dollar.
10. US dollar
The USD wraps up our list of the strongest currencies in the world. It is the official legal tender of the United States of America and its territories. The USD is the most traded currency in the world and is also the largest reserve currency held by central banks all over the world. Several commodities including oil, gold and copper are priced in USD.
Understanding Currency Stability and Value
The value of a currency refers to its strength or relative worth compared to other currencies. As the list above shows, currencies are often compared to the USD to determine their value. A currency’s value depends on various factors like its economic strength, interest rate and global demand. As currencies are bought and sold in the foreign exchange markets, their value will increase and reduce based on the demand and supply.
A currency’s stability refers to how well it is able to hold its value over time (basically the consistency of its purchasing power. This means the highest-value currency isn’t always the most stable. The Swiss franc (CHF) is generally considered to be the safest currency in the world due to its stability, but it isn’t the highest value in the world. However, there’s often a link between both qualities as the best currency in the world is renowned for its stability as well.
Frequently Asked Questions About Global Currencies
What is the strongest currency in the world?
The Kuwaiti Dinar is the strongest currency in the world, currently worth about 3.26 USD.
Which country has the highest currency value?
The Kuwaiti Dinar is the currency with the highest value. The value of this currency is tied to the country’s abundant oil reserves and economic prosperity.
What makes a currency the most valuable?
The value of a country’s currency depends on its demand and supply in the forex market. This is determined by various factors such as the country’s economic strength, interest rates, inflation, and capital flow.
How is the strength of a currency determined?
How the strength of a currency is determined depends on whether it is a floating or pegged currency. Most currencies are floating, which means their strength depends directly on the exchange rate in the forex market, a reflection of how much investors trust the economic strength and fiscal policy of the country. For currencies pegged to another currency, their value is fixed at an agreed rate and will depend on the strength of the currency it is pegged to.
What are the top 10 strongest currencies in the world?
The top 10 strongest currencies in the world are the Kuwaiti Dinar, Bahraini Dinar, Omani Rial, Jordanian Dinar, Great Britain Pound, Gibraltar Pound, Cayman Island Dollar, Swiss Franc, Euro and United States Dollar.
Is the Euro stronger than the Dollar?
Yes. The Euro is stronger in terms of the exchange rate which determines their relative values. However, the USD is the most traded currency as well as the largest reserve currency in the world.
Which currency is considered the most stable?
The most stable currency in the world is the Swiss franc (CHF).
