From ancient barter systems to today's sophisticated economies, currency remains the universally accepted medium of exchange. Over centuries, currency has evolved into fiat money, raising questions about how national currencies are valued and which are the strongest globally. Let's explore the ten most valuable currencies as of May 2024.
What is Currency Strength?
The strength of a currency is determined by the purchasing power of the said currency relative to other currencies.
The strength of a currency is calculated through a benchmark (typically USD). For example, if the value of BDT decreases relative to USD, it means that the purchasing power of BDT will fall resulting in depreciation. On the contrary, an increase suggests greater purchasing power and currency appreciation.
Read more: Bangladesh's foreign exchange reserves fall below 20 bln USD
How are Currencies Valued?
The value of a currency is determined in the forex market. The price of one currency in terms of another is called the exchange rate. Exchange rates are determined by supply and demand forces in the market.
But beyond the concept of supply and demand, other factors like economic growth and stability, central bank policies, global trade flows, and market speculation play a huge role in determining the value of a currency.
Historically, the USD enjoyed a strong valuation due to a positive combination of the above factors. Today the USD is the primary reserve currency of the world as many central banks and international institutions hold significant reserves of US dollars for international trade and investment purposes. The Triennial Central Bank Survey conducted by the Bank for International Settlements (BIS) found that the USD was one side of 88% of all forex transactions between 2019 to 2022.
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Top 10 Most Valuable Currencies in the World As Of May 2024
Kuwaiti Dinar (KWD)
The Kuwaiti Dinar is the strongest currency in the world with 1 KWD buying 3.26 USD. The KWD is a relatively new currency introduced in the 1960s.
The currency was initially pegged with the British Pound but later re-pegged to an undisclosed basket predominantly focusing on the USD. Like most Middle Eastern countries, the KWD draws its strength from global oil exports.
Bahraini Dinar (BHD)
Bahraini Dinar comes in second with 1 BHD buying 2.66 USD. The BHD was founded in 1965 and has since been pegged to the USD.
Bahrain, being a small island nation in the Persian Gulf draws much of its currency strength from the large oil and gas exports. Additionally, the country has diversified its economic interests to include financial services, tourism, manufacturing, and logistics. The sound monetary policy, strong reserve, and a stable political environment also play into BHD’s strength.
Read more: Bangladesh Bank introduces Crawling Peg System; dollar rate set at Tk 117 with immediate effect
Omani Rial (OMR)
The Omani Rial is the third strongest currency in the world. 1 Omani Rial can be bought for 2.60 USD. The OMR was founded in 1970 and has since been pegged with the USD.
The geographic position of Oman as a Gulf nation has endowed it with massive oil and gas reserves. In addition to the oil and gas exports, the Omani Central Bank has been prudent in formulating fiscal policies. The political stability and FDI inflow combined with a short supply of OMR have been key determinants for its strong position.
Jordanian Dinar (JOD)
Moving away from oil-rich economies, the Jordanian Dinar holds the fourth place among the strongest currencies in the world. 1 Jordanian Dinar is equivalent to 1.41 USD.
Jordan has historically been a politically stable country even though it is positioned in a geographically tense territory. The currency, since its foundation in the 1950s, has been pegged to the USD. The country undertook reform measures to liberalize trade, streamline regulations, and enhance the business environment. Besides, a strong foreign aid and remittance environment also aided JODs strength.
Read more: BB introduces US dollar and currency (Taka) swap for commercial banks
British Pound (GBP)
With over 600 years of history, the British Pound is one of the oldest and strongest currencies in the world. 1 GBP currently buys 1.26 USD. The British Pound is not pegged to any other currency.
Throughout much of the 19th and middle of the 20th century, the GBP was the primary reserve currency of the world. To this day, the GBP takes a minor position right after the USD. Historically, the UK had a strong GDP growth rate with the Bank of England strongly regulating the monetary policies. The high trade balance and foreign investment inflow have worked in favor of the GBP’s position.
