Have you ever thought about the strongest currencies in the world or the reason why oil-exporting nations generally have the highest-valued ones?
This article will look at the top 10 strongest currencies in the world in relation to their exchange rates against dollar U.S. dollars (USD) and provide a description of the elements that determine their worthiness.
What is the currency strength?
The strength of a currency is the buying power of a currency against other currencies.
It is believed that the U.S. dollar was chosen as the standard because of its status as the world’s most powerful vehicle currency. As per the Triennial Central Bank Survey conducted by the Bank for International Settlements (BIS) The U.S. dollar was on the other side of 88 percent of the total currency exchange (forex) transactions that were conducted between 2019 and 2022.
What makes a currency strong?
There are many factors that affect the strength of a currency that determine currency strength, including the rate of inflation, and stability of the political system, and the outlook for economic growth.
Here, we concentrate on three major essential factors that influence exchange rates that cover all other aspects.
Terms of Trade
The term “terms of trade” refers to the amount of a country’s export prices versus import prices. In general, a rise in a country’s terms of trade is correlated with an appreciation in the currency of its country. A decrease in the terms of trade results in a decrease in currency exchange.
Let’s consider a nation that exports commodities such as Australia as an example. The boom in property prices in Asia will boost demands for the iron ore which is Australia’s primary export. During these periods, Australia’s value in exports will be much more than its import price.
The huge increase in capital flows to Australia results in a positive economic outlook for the country’s economy. This means that the Australian dollar is seeing a rise in the demand of traders and money market investors which leads to a price increase.
The terms of trade are greatly affected by the price of commodities.
Interest Rate Variables
The interest rates set by central banks impact the demand for currency and consequently affect its foreign exchange rate.
However, it’s the variation in interest rates between different nations (called the interest rate differences) that determines how capital flows. In the case of the interest rates in India decrease, while other economies raise their interest rates, the value of Indian assets will be less appealing to investors. Markets will be forced to sell Indian assets to other sovereign assets that provide better returns on investment.
The interest rates are affected by a variety of factors, with the rate of inflation rate being the most significant of them. A higher rate of inflation within a country will usually cause the central bank to raise the interest rate.
Central banks exert a significant influence on the currency’s performance. Certain central banks opt to exercise greater control over the rates of forex than others. For instance, the Bank of Japan is known to manipulate the Japanese yen in order to keep exchange rates that are advantageous to its trading.
The governments of Middle Eastern nations like Kuwait maintain their currencies at a specific percentage to the U.S. dollar or to an array of currencies around the world. They keep close control of the volume of foreign exchange to reduce speculation in currency and increase volatility.
Top 10 Strongest Currencies in the world
Here’s a list of the strongest currencies in the world for 2023.
1. Kuwaiti Dinar (KWD)
The Kuwaiti dinar (KWD) was the most valuable currency compared to the U.S. dollar in 2023. The KWD/USD rate was 3.23 at the time of October 2023.
The Kuwaiti economy is mostly due to crude oil exports. In the report of OEC Kuwait, the nation recorded an export value of $58.2 billion for 2021, compared with an estimated import that was $33.8 billion.
The exchange rate has remained nearly the same level (down 1.3 percent at the date of writing) throughout 2023.
2. Bahrain Dinar (BHD)
The Bahrain dinar (BHD) was the second-highest-valued currency compared to the U.S. dollar in 2023. The BHD/USD exchange rate was 2.65 at the end of October 2023.
As with Kuwait its main export, Bahrain’s primary product was petroleum-based products. Furthermore, it was a Middle Eastern country that also exported iron ore and aluminum. As per the OEC, Bahrain posted an export value of $15 billion in 2021, compared with an estimated import that was $15.5 billion.
The exchange rate between BHD and USD remained the same in 2023.
3. Omani Rial (OMR)
The national currency of Oman, known as Omani rial (OMR), is the country’s national currency. Omani rial (OMR) was ranked number three on the ranking of most valuable currencies around the globe. The OMR/USD rate was 2.59 at the time of writing in October 2023.
The primary exports of Oman were crude products. As per the OEC, Oman posted an export value of $56.9 billion for 2021, compared to the import value of $34 billion.
OMR/USD exchange rates were unchanged in 2023.
4. Jordan Dinar (JOD)
The Jordan dinar (JOD) was in fourth place on the list of the most powerful currencies around the world. The JOD/USD rate was 1.4 in October 2023.
Jordan’s primary exports differed from those of its neighbors because the nation made the highest profit by exporting fertilizers. As per the OEC, Jordan posted an export value of $11.2 billion in 2021, compared to the import worth that was $24.6 billion.
The Jordan Dinar has also remained relatively unchanged in relation to the U.S. dollar through the period of 2023.
5. British Pound (GBP)
The addition in the British Pound (GBP) snapped the Middle East’s lead on the top 10 of the strongest currencies in the world. GBP/USD was 1.209 in October 2023.
The GBP remains a highly liquid currency, and just the U.S. dollar, Euro, and Japanese Yen trading more than sterling on the foreign exchange market between 2019 to 2022. In the opinion of OEC The UK reported an export value of $420 billion in 2021, compared to the import value of just $681 billion.
As of the writing, the GBP/USD rate was nearly closed in 2023. But, GBP did make a record high of 1.314 in the course of the year.
6. Cayman Islands Dollar (KYD)
The Cayman Islands dollar (KYD) was next in the order, with the KYD/USD rate at 1.2 in October 2023.
The Cayman Island is a self-governing British Overseas Territory located in the Caribbean Sea.
The KYD has remained mostly unaffected by the U.S. dollar through the course of 2023.
7. Swiss Franc (CHF)
The Swiss Franc (CHF) was the seventh-highest valued currency compared to USD in 2023. The rate of CHF/USD was 1.11 at the end of October 2023.
Is Swiss Franc is a highly sought-after currency because of Switzerland’s supremacy in the world of financial services. Switzerland hosts one of the largest private banks, UBS Bank. In the report of OEC, Switzerland posted an export value of $371 billion in 2021, compared to the imported value of $ 328 billion.
At the time of writing, the CHF/USD rate increased by 2.8 percent from the beginning of 2023.
8. Euro (EUR)
The Euro (EUR) was eighth on the list of the strongest currencies in the world. The EUR/USD rate stood at 1.05 in October 2023.
The Euro was created in 1999, and it is now used throughout every European Union state except Denmark. As per BIS, EUR was the second most traded currency worldwide between the years 2019 and 2022.
As of the date of the time of writing, EUR/USD rates had decreased by nearly 2% in 2023.
9. Singapore Dollar (SGD)
It is believed that the Singapore dollar (SGD) was the first Southeast Asian currency on the list. SGD/USD was 0.72 at the time of writing in October 2023.
Singapore is a high-income country and is well-known for its favorable regulatory environment that has aided in stimulating the economy. As per the OEC, Singapore exported goods valued at $351 billion in 2021, while importing goods valued at $362 billion.
As of the date when this article was written, rates for USD/SGD were at 2.3 percent year-to-date by 2023.
10. Brunei Dollar (BND)
It is believed that the Brunei dollar (BND) was ranked within the top ten on the rankings of the most robust currencies around the globe in 2023. BND/USD rates were 0.72 in October 2023.
Brunei is a nation with a high income situated in South-East Asia. Based on the OEC Brunei’s exports of goods were worth $11.3 billion by 2021, compared to imports of $7.93 billion.
At the time of writing, the BND/USD rate had dropped by around 2.3 percent year-to-date by 2023.
It is crucial to remember that this list combines the currencies that have the highest rates of exchange against dollar U.S. dollar. But, just the fact that a currency is valued is not enough to make a currency more popular.
Some of the currencies that are listed on this list aren’t very popular with investors due to the strict regulations and capital controls that are imposed by their governments.