While the U.S. dollar is widely regarded as the world’s most dominant currency and the primary global currency for trade, it may come as a surprise that it doesn’t hold the title of the strongest currency among the approximately 180 traditional fiat currencies recognized as legal tender worldwide. Here, we present the top 10 most powerful currencies in the world, determined by their relative value compared to the U.S. dollar.
Understanding Foreign Currency Valuation
Foreign currency is exchanged in pairs, such as the exchange of Indian rupees for U.S. dollars or British pounds for U.S. dollars. Consequently, the value of a currency is always expressed in relation to another currency, known as the “exchange rate.”
Most currencies have a “floating” exchange rate, which means their value fluctuates based on market supply and demand. However, some currencies are “pegged” to another currency, like the U.S. dollar, and maintain a fixed rate of exchange.
Fluctuations in exchange rates can impact the cost of goods and services when dealing in foreign currencies. For instance, if the pound weakens against the dollar, it will take more pounds to fund a vacation in the United States.
Nevertheless, exchange rate fluctuations also offer investment opportunities for those seeking to profit from foreign exchange trading. We have prepared a guide that explains the fundamentals of foreign exchange movements, along with our recommendations for the best forex brokers.
It’s important to note that any form of market-based investment or speculation carries a risk to your entire capital. Investments can experience fluctuations in value, potentially leading to partial or total losses. Leveraged products like contracts for difference involve high speculation and the added risk of exceeding the originally invested amount.
Here are the Top 10 Strongest Currencies as of September 2023, ranked by the number of foreign currency units you can exchange for one U.S. dollar. Exchange rates are sourced from our currency converter, based on data from Open Exchange at the time of writing:
1. Kuwaiti Dinar (KWD)
The Kuwaiti Dinar stands as the world’s strongest currency, with a value of 1 Kuwaiti Dinar purchasing 3.26 U.S. dollars, or inversely, 1 U.S. dollar equaling 0.31 Kuwaiti Dinars. Situated between Saudi Arabia and Iraq, Kuwait derives much of its prosperity from being a prominent global oil exporter. The Kuwaiti Dinar was introduced in the 1960s and was initially linked to the British Pound before being re-pegged to an undisclosed basket of currencies.
2. Bahraini Dinar (BHD)
The Bahraini Dinar holds the position of the second strongest currency globally, with 1 Bahraini Dinar equivalent to 2.65 U.S. dollars, or conversely, 1 U.S. dollar equaling 0.38 Bahraini Dinars. Bahrain, an island nation in the Persian Gulf near Saudi Arabia, shares a similar economic reliance on oil and gas exports as Kuwait. The Bahraini Dinar came into circulation in 1965 and is tied to the U.S. dollar.
3. Omani Rial (OMR)
The Omani Rial ranks as the third strongest currency worldwide, with 1 Omani Rial exchanging for 2.60 U.S. dollars, or in reverse, 1 U.S. dollar corresponding to 0.38 Omani Rials. Oman, located at the southern tip of the Arabian Peninsula between the United Arab Emirates and Yemen, also thrives as a major exporter of oil and gas. The Omani Rial was introduced in the 1970s and is pegged to the U.S. dollar.
4. Jordanian Dinar (JOD)
The Jordanian Dinar holds the fourth position as the world’s strongest currency, with 1 Jordanian Dinar buying 1.41 U.S. dollars, or reciprocally, 1 U.S. dollar equating to 0.71 Jordanian Dinars. Jordan, mostly landlocked and bordered by Egypt, Syria, Iraq, and Saudi Arabia, relies less on oil and gas exports compared to its neighbours and faces challenges of slow economic growth and increasing debt. The Jordanian Dinar was introduced in 1950 and is pegged to the U.S. dollar.
5. British Pound (GBP)
The British Pound secures a fifth place among the world’s strongest currencies, with 1 British Pound purchasing 1.20 U.S. dollars, or alternatively, 1 U.S. dollar equaling 0.83 British Pounds. Britain, the sixth-largest country by GDP according to the World Bank, saw the introduction of the Pound in the 1400s before its decimalization in 1971. The British Pound is a free-floating currency, not tethered to other currencies.
6. Cayman Islands Dollar (KYD)
The Cayman Islands Dollar shares the sixth spot as one of the world’s strongest currencies, with 1 Cayman Islands Dollar equivalent to 1.20 U.S. dollars, or conversely, 1 U.S. dollar corresponding to 0.83 Cayman Islands Dollars. The Cayman Islands, a British territory in the Caribbean and a prominent offshore financial center introduced the Cayman Islands Dollar in the 1970s, and it is pegged to the U.S. dollar.
7. Gibraltar Pound (GIP)
The Gibraltar Pound is tied for the sixth position among the world’s strongest currencies, with 1 Gibraltar Pound exchanging for 1.20 U.S. dollars, or reciprocally, 1 U.S. dollar equating to 0.83 Gibraltar Pounds. Gibraltar, situated at the southern tip of Spain and officially a British territory, introduced the Gibraltar Pound in the 1920s, and it is pegged at par with the British Pound, meaning that 1 GIP is equal to 1 GBP.
8. Swiss Franc (CHF)
The Swiss Franc shares the eighth position as one of the world’s strongest currencies, with 1 Swiss Franc purchasing 1.07 U.S. dollars, or alternatively, 1 U.S. dollar equaling 0.93 Swiss Francs. The Swiss Franc is the official legal tender of Switzerland and Liechtenstein and is renowned for its status as a safe haven currency due to Switzerland’s political stability. Introduced in 1850, the Swiss Franc was briefly pegged to the Euro before adopting a free-floating exchange rate.
9. Euro (EUR)
The Euro is also in the eighth position among the world’s strongest currencies, with 1 Euro buying 1.07 U.S. dollars, or conversely, 1 U.S. dollar corresponding to 0.94 Euros. Serving as the official currency of the Eurozone, which comprises 19 out of the 27 European Union countries, physical Euro currency came into circulation in 2002 and operates on a free-floating exchange rate system.
10. US Dollar (USD)
The U.S. Dollar ranks as the 10th strongest currency globally, maintaining a 1-to-1 exchange rate with itself. All other currency units across the world have a lower value compared to the U.S. Dollar. Originating in the 1700s, the U.S. Dollar is recognized as a legal tender in the United States, various U.S. territories, and sovereign nations such as Puerto Rico, Ecuador, and Zimbabwe. The United States boasts the world’s largest economy by GDP, and the U.S. Dollar stands as the most widely traded currency globally. Additionally, it serves as the primary reserve currency held by central banks and is used to price numerous commodities, including oil, gold, and copper.
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These rankings shed light on the world of currency strength, giving us a peek into the economic vitality of different countries and regions. As our global financial landscape keeps evolving, these currency dynamics will remain a crucial factor in influencing international relationships and the overall economic well-being of nations.