Quick! What’s the strongest currency in the world? If you answered the US dollar, as most people likely think, then you would be very wrong, so much so that it would have been better not to have guessed at all.
But we don’t blame you for thinking the American dollar is the most powerful currency in the world. After all, considering that the US has the world’s largest and strongest economy, the US dollar has become synonymous with economic power. Moreover, it’s the most-traded currency globally by a large margin.
So, if the US dollar isn’t the world’s strongest currency, what is? The answer might surprise you. Many currencies are stronger than the US dollar.
How Is Foreign Currency Priced?
Before you learn what the highest-valued currencies in the world are, it’s important to know how foreign currencies are priced.
Foreign currencies are traded in pairs, such as buying US dollars with Canadian dollars or Euros with British pounds. As such, a currency is always priced relative to another currency, resulting in what is commonly referred to as an ‘exchange rate’.
Most currencies are ‘floating’, while a few are pegged. The value of floating currencies fluctuates depending on demand and supply. For example, the higher the demand for the US dollar, the higher its value, and vice versa.
Pegged currencies are tied to another currency at a fixed exchange rate and, therefore, fluctuate concurrently with that currency. Examples include the Giblatran pound, which is pegged to the British pound at a 1 to 1 fixed rate, and the Saudi Arabian Riyal, which is pegged to the US dollar at a fixed 3.75 SAR to 1 USD.
Some currencies are strong because of their inherent value, while others are strong only because they are pegged to a strong global currency, usually the U.S. dollar.
World’s Strongest Currencies
In the global financial market, the US dollar is often used as the reference point for all currencies, and that’s what we used for this list.
The exchange rates presented are approximations based on historical trends.
1. Kuwaiti Dinar (KWD)
The Kuwaiti Dinar holds the title of the strongest currency in the world. Pegged to an undisclosed basket of currencies that allows it to fluctuate in a relatively small range, one Kuwaiti dinar can buy approximately 3.26 US dollars (or, US$1 = 0.31 Kuwaiti dinars).
Kuwait is an oil-rich Gulf nation with a small population, granting it a solid economic foundation that provides its citizens with a high standard of living.
However, the cost of living in Kuwait is relatively high, primarily due to the country’s reliance on imports for many goods and services. Even so, if you were offered a choice between $1,000 USD or 1,000 KWD, you’d be foolish to choose the US dollar.
2. Bahraini Dinar (BHD)
Bahrain follows closely with its strong currency, the Bahraini Dinar. However, unlike the Kuwaiti Dinar, it is pegged to the US dollar at a fixed exchange rate of 1 BHD to 1.65 USD (or, US$1 = 0.38 Bahraini dinars)
Similar to Kuwait, Bahrain benefits from large oil reserves, a small population, and a strategic location. The country has invested in diversifying its economy, particularly in the finance and tourism sectors.
While expatriates constitute a significant portion of the population, the cost of living in Bahrain is moderate compared to some of its neighboring countries.
3. Omani Rial (OMR)
Oman’s currency, the Omani Rial, reflects the country’s stable economy, driven by oil exports, trade, and tourism. 1 Omani rial can buy approximately 2.60 US dollars (US$1 = 0.38 Omani rial), enough to make it the world’s third strongest currency.
Despite its relatively small size, Oman has invested in infrastructure development and economic diversification initiatives. The cost of living in Oman varies depending on the region, with urban areas like Muscat being more expensive compared to rural areas.
4. Jordanian Dinar (JOD)
Jordan’s economy is much weaker than its Gulf Arab counterparts but it’s stable, something that can’t be said about nearly all of its neighbors. The Jordanian dinar is pegged to the US dollar at a rate of 1 JOD to 1.41 US dollars (or, US$1 = 0.71 Jordanian dinar).
The peg to the USD dollar is a big reason why the Jordanian dinar has maintained its strength despite the myriad of challenges posed by regional instability. Jordanian citizens can also take solace in the fact that Jordan has a moderate cost of living, with affordable housing and utilities compared to many other countries in the region.
Question: Did you know that the Jordanian dinar is a stronger currency than the Israeli Shekel, even though Israel’s economy is over 10 times stronger than Jordan’s economy? The two countries border each other and have roughly the same population.
5. British Pound Sterling (GBP)
The British Pound Sterling has a long history of being one of the world’s strongest currencies, reflecting the United Kingdom’s status as a global financial hub. 1 British pound buying 1.28 US dollars (or US$1 = 0.78 British pounds) is par for the course.
Despite the economic uncertainties caused by Brexit and occasional economic fluctuations, the UK’s diversified economy and strong institutional framework support the Pound’s stability.
However, the cost of living in cities like London can be exceptionally high, particularly in terms of housing and transportation.
Note: The Gibraltar pound is distinct from the UK pound. However, considering that it’s pegged to the UK pound at par and Gilbaratar is an overseas territory of the UK, it doesn’t make sense to treat them as separate currencies in our ranking. They are interchangeable.
6. Cayman Islands Dollar (KYD)
The Cayman Islands, a British Overseas Territory, boasts a strong economy driven by tourism, offshore banking, and financial services. 1 Cayman Islands dollar equals around 1.20 US dollars (or, US$1 = 0.83 Cayman Islands dollars).
The strength of the Cayman Islands Dollar reflects the territory’s economic stability and status as a global financial center. While the cost of living in the Cayman Islands is relatively high, particularly in terms of housing and dining, residents benefit from tax advantages and a high standard of living.
7. Swiss Franc (CHF)
Switzerland’s reputation for financial stability and neutrality underpins the strength of the Swiss Franc, with 1 Swiss franc buying 1.15 US dollars (or, US$1 equals 0.87 Swiss francs).
Renowned for its banking sector, precision manufacturing, and high-quality services, Switzerland boasts one of the highest GDP per capita figures globally.
Unfortunately, the cost of living in Switzerland is notoriously high, especially in cities like Zurich and Geneva, attributed to factors such as strong currency, high wages, and high quality of life.
8. Euro (EUR)
The Euro serves as the official currency for 20 of the 27 European Union member states, and its strength is attributed to the economic might of the EU, one of the largest economies globally. The Euro has long been stronger than the US dollar, with 1 Euro buying 1.10 US dollars (or US$1= 0.91 euros)
Despite occasional challenges within the Eurozone, including disparities in economic performance among member states, the Euro remains a formidable currency.
The cost of living across Eurozone countries varies significantly, with northern European nations generally having higher living expenses compared to their southern counterparts.
9. US Dollar (USD)
The United States Dollar remains the world’s primary reserve currency and is used to price most commodities, including oil, gold, and copper. Its strength is underpinned by the country’s economic strength, innovation, and global influence.
Even so, the U.S. dollar is only the ninth strongest currency in the world (tenth if the Gibraltar pound is treated separately from the UK pound). All other currencies are worth less than the US dollar.
As the largest economy globally, the US offers diverse opportunities across various sectors. However, the cost of living in the US varies significantly by region, with major cities like New York and San Francisco having substantially higher living expenses compared to rural areas.
Summary
The strength of a currency is a reflection of a country’s economic fundamentals, including GDP, trade balance, and fiscal policies. But while most currencies are strong or weak because of their inherent value, a few are strong because of being pegged to another currency with a high value.
The Kuwaiti Dinar, not the US dollar, is the strongest currency in the world. In fact, the US dollar is only the ninth strongest currency.
So, what did you think about our list of the strongest currencies in the world? Did any of them surprise you?
