Beyond FOREX: What is the Strongest Currency in The World
What makes for the strongest currency in the world? How is this determined? In this post we look at those questions so you understand what makes a country’s currency ‘strong’ in the global currency ranks.
Did you know that there are 180 currencies in the world that are recognized as legal tenders by the United Nations? In this post we will go more into which ones are the strongest and why.
If you are a veteran or aspiring FOREX trader then I am sure you probably spend quite a bit of time researching info on currency trading.
And if you are an aspiring day trader (FOREX or otherwise) then understanding global financial markets will be very beneficial to your trading success. And this coupled with a solid understanding of day trading strategies and principles are sure to turn you into a profitable and consistent trader.
But I am also guessing you probably assume that the most traded currencies are also the strongest. As you read through this article you will find that this isn’t always the case.
So, in this post we will delve into the fascinating world of global finance and unveil the current leading currencies of the world as well as discuss what are the factors that make them strong (Such as political and financial as mentioned earlier and others).
For example purposes, I’m going to use the USD for conversions and comparison.
How Do We Measure the Strongest Currency in the World?
Below we will look at three main factors used to ‘measure’ how strong a currency is. Just be sure to note that there are more factors than just FOREX buying and selling of a currency. And while this is a factor is determining a currencies strength it’s definitely not the only one.
1. Global Foreign Reserves
Pretty much every country’s Central bank maintains a level of foreign reserve currency for a number of economic reasons that we don’t need to get into here. But the main point is that the main currency used by all country’s to keep their foreign reserves in are the most stable and thereby the strongest currencies in the world also.
And according to an IMF (International Monetary Fund) 2022 report there are 5 currencies held by all of the world’s foreign currencies and the most widely used is the US dollar which makes it the world reserve currency and one of the strongest overall.
2. FOREX Trading Volume
How much a currency is bought and sold which is also called foreign exchange (FOREX) trading volume is another important consideration for which are the strongest currencies in the world.
Just remember that this isn’t the only factor and just because a currency has a lot of buying and selling in FOREX it doesn’t mean that it is among the world’s strongest currencies.
3. Exchange Rate
This is definitely a major factor for just how strong a currency is. A lot of the world’s currencies are considered strong because of their exchange rate to the USD.
Further down in this post we list out currencies which have excellent exchange rates against the US dollar.
What is the Strongest Currency in the World?
So while we discussed three very important factors that can be used to measure the strength of a currency, there are other factors too. Besides those explained above other factors that make a currency strong include a country’s economic conditions, inflation rate as well as political news and events.
The different currencies talked about below are the strongest in the world right now due to their stable economics, GDP as well the three factors discussed above.
Kuwaiti Dinar
First of all, the Kuwaiti Dinar is the strongest currency in the world right now, with an exchange rate of 1 Kuwaiti Dinar for 3.26 United States Dollars. The currency is abbreviated with the initials KWD and is the legal tender of Kuwait.
Named officially the State of Kuwait, it’s a country situated in West Asia, on the north side of Eastern Arabia, close to the Persian Gulf. Due to its incredible position and its wealth in natural resources such as gas and oil, besides that, the country has a stable economy leading to one of the strongest currencies in the world.
Bahraini Dinar
As the second-strongest currency, we have the Bahraini Dinar, which currently has an exchange rate of 1 Bahraini Dinar for 2.65 USD. The abbreviation for the currency is BHD.
This dinar is the legal tender of Bahrain, an island situated in West Asia. It’s located on the Persian golf, and It is made up of an archipelago with more than 80 islands, of which some are artificial. Just like the precious country, Bahrain made it to the list due to its high number of oil reserves on the island, which comprise more than 80% of its GDP.
Omani Rial
The Omani Rialis the legal tender of the Sultanate of Oman, a country in West Asia, located on the coast of the Arabian Peninsula with connections to the Persian Gulf. The country is bordered by the UAE, Yemen, and Saudi Arabia.
The current exchange rate for the Omani Rial is 1 to 2.60 USD, and the abbreviation of the currency is OMR.
The legal tender of Oman is among the strongest due to its prosperous and stable economy, the OMR was fixed to the USD for several years, but it was recently replaced, but it remained firm and solid. Not only that, Oman economy is based on oil prices, since it’s one of the main producers worldwide, like the previous spots.
Jordanian Dinar
At an exchange rate of 1 to 1.41 USD, the Jordanian Dinar also ranks among the strongest currencies in the world.
The government of Jordan has a tight monetary policy that restricts the value of the currency which also makes it stable.
Historically Strong World Currencies
I explained earlier that there are different factors that can affect the strength of a currency. The currencies below have been among the world strongest for some time and will probably continue to remain in the top rankings.
- The Cayman Islands dollar (KYD) is worth 1.20 USD and is pegged to the USD which makes it a stable currency.
- The British Pound Sterling (GBP) is worth 1.27 USD right now. It is strong because of many years of financial stability and also because the UK is a big player in world commerce.
- Swiss Franc (CHF) is currently exchanged for 1.13 USD and Switzerland is historically a safe-haven for investors.
- Gibraltar Pound (GIP) currently exchanged for 1.27 USD and its value is tied to the GBP which makes it very stable.
- Euro (EUR) currently exchanged for 1.09 USD and remains strong because of the EU’s GDP growth and employment rates and strong economics.
World Strongest Currencies : Wrap Up
As a FOREX trader you already know the top trading pairs. And the trading volume of FOREX is a pretty big factor used to measure the world’s strongest currencies. And if you are an avid FOREX trader I would definitely recommend simplifying your trading as much as possible including technical analysis and indicators in order to pave the way for a profitable trading career.
But as we said earlier, this is not the only factor. Currencies that are used as the world’s reserve is a major factor and so are economic and political events within a country. They also play a major role in determining the strength of a currency.
How much a currency is worth in terms of USD or its exchange rate to the US Dollar is another way the strength of a currency is measured.
As I stated earlier, just because a currency is ranked as among the strongest in the world, its trading volume may not be very high in comparison to other trading pairs.
So I hope this article has helped in understanding how a currency can be regarded as the strongest currency in the world and also what influences this ranking.
Last Updated on March 18, 2024
