ALBAWABA - If you ask yourself about the world's strongest currency and immediately think of the US dollar, you're mistaken!
The US dollar is usually considered the world's strongest currency, and indeed, the greenback is the most widely traded currency. However, you might be surprised to learn that it's not the strongest currency.
Currencies are traded in pairs; for example, you buy the dollar against your country's currency or another local currency at a specified rate. The exchange rate of each currency is determined based on supply and demand in what is known as the exchange rate. Some central banks fix the exchange rate of their currency at a specific level to protect it from fluctuations, attract deposits in their local banks, and achieve financial stability. Thus, a higher value of the local currency doesn't necessarily indicate the strength or size of a country's economy. Here are the top 10 strongest currencies in the world in 2023, with the US dollar as a reference point.
Kuwaiti Dinar
Sitting at the top of the list is the Kuwaiti Dinar, with an exchange rate of 3.23 US dollars. Kuwait's economy primarily relies on oil revenues, making it one of the wealthiest countries in the world. The Kuwaiti Dinar was initially pegged to the British pound before being linked to the US dollar from January 5, 2003, to May 19, 2007, according to the Central Bank of Kuwait's website. Starting from May 20, 2007, the currency's exchange rate has been linked to an undisclosed basket of global currencies, aiming to maintain the purchasing power of the national currency and contain inflationary pressures on the local economy.
Bahraini Dinar
Following the Kuwaiti Dinar, the Bahraini Dinar ranks second, with an exchange rate of 2.65 US dollars. Similar to Kuwait, Bahrain heavily relies on oil exports. The Bahraini Dinar started trading in 1965 and is linked to the US dollar. Stabilizing the exchange rate of the local currency against the dollar is a key element of the Central Bank's monetary policy, aimed at preserving the currency's stability, lowering inflation rates, and providing an attractive investment environment, as per the Central Bank of Bahrain's website.
Omani Rial
The Omani Rial can be exchanged for 2.60 US dollars. Oman is located in the Arabian Gulf region and, like its neighbors, is a significant source of oil and gas exports. The Omani Rial began trading in the 1970s and was initially linked to the US dollar.
Jordanian Dinar
The value of the Jordanian Dinar is equivalent to 1.41 US dollars. Jordan is located in the Arabian Gulf region, but unlike other Gulf states, Jordan has a lower dependency on oil and gas exports and struggles with economic slowdown and rising debt. The Jordanian Dinar has been the official currency of Jordan since 1950, and the high value of the currency is primarily attributed to its peg to the US dollar, ensuring currency stability and attracting deposits to Jordanian banks.
British Pound
The British Pound is the fifth-strongest currency in the world, with an exchange rate of 1.22 US dollars. This isn't surprising, as the United Kingdom ranks as the sixth-largest country in the world in terms of GDP, according to the World Bank. The British Pound was initially introduced in the 15th century and is freely traded, meaning its value isn't based on other currencies.
Cayman Islands Dollar
The Cayman Islands are British territories in the Caribbean Sea, and their dollar is valued at 1.20 US dollars. The Cayman Islands offer many incentives to attract investors, though they face allegations of facilitating money laundering and illicit financial practices.
Swiss Franc
The Swiss Franc is the official legal currency of Switzerland and Liechtenstein and is often considered a safe haven due to Switzerland's political stability. It is the eighth most expensive currency in the world, with a value of 1.10 US dollars. The Swiss Franc was first introduced in 1850 and was later linked to the Euro for a brief period before transitioning to free-floating.
Euro
The Euro can be exchanged for 1.05 US dollars and ranks ninth among the largest currencies in the world. The Euro is the official currency of the Eurozone, which includes twenty of the European Union's twenty-seven member states. Trading in Euro began in 2002, and its value is determined by supply and demand.
US Dollar
Despite being the most traded currency in the world, the US dollar ranks tenth among the 180 official currencies globally in terms of value. Trading in the US dollar began in the 18th century, and it is the official currency of the United States and its territories.
