In this article, we look at the 15 Strongest Currencies in the World in 2024. To skip our detailed analysis of how we reached these rankings, you can head to the 5 Strongest Currencies in the World in 2024.
People have inhabited planet earth by forming cultures and societies, which in turn has led to demarcation of regions as countries. With the emergence of coins and currencies in replacement of barter good trade, the concept of unique national currency also took root. The United Nations recognizes 180 currencies as legal tenders- Dollar, euros, pound, pesos, and yen, among others. While many currencies do exist, it is the strongest currencies in the world which dictate the global scenario.
What Determines Strength of Currencies?
Numerous factors have been identified as pertinent for consideration while determining which currencies are the strongest as compared to others. Multiple economic conditions within countries like foreign exchange reserves held by the central bank, balance of trade, demand and supply in the foreign exchange market, inflation, interest rates, political and economic stability as well as international acceptability and purchasing power of the currency, are a few to be kept in mind. In this article, we look at three broad points that encompass these factors and are hailed by analysts as essential elements in defining the strength of a currency.
Central banks of all countries keep an amount of foreign currency reserve. This necessity arises from various reasons, some of which are: support for monetary and exchange rate system, liquidity, assurance of fulfilling external debt obligations and attracting international investor. According to the International Monetary Fund (IMF) 2022 report, 94% of all foreign reserves in the world are held in five currencies, with US dollar being the world reserve currency (59% of all reserves).
The next aspect to be covered for strongest currencies in the world is foreign exchange trading volume, also known as Forex trading volume. Forex trading refers to the exchange (buying and selling) of currencies, in pairs, with the intention to make profit. Forex trading volume is simply the amount of currency bought and sold within a given time frame. Some of the most traded currency pairs are USD/JPY, EUR/USD, GBP/USD, EUR/GBP and USD/CHF. EUR/USD, however, is the most traded currency pair in the world in terms of volume.
Forex trading gives an idea about the value of one currency with respect to the other. This is also referred to as the exchange rate. The exchange rate is an extremely crucial part of a nation’s economic policy and is therefore, closely linked to both political and economic prevalent conditions. The central monetary authority of the country plays a significant role in determining the system to be followed and can vary the policy dependent on the need at the time.
While Central bank’s duty is to manage foreign reserves, large commercial banks tend to provide Forex trading business. Some of the leading companies in the Forex market include JPMorgan Chase & Co. (NYSE:JPM), Citigroup Inc. (NYSE:C), Barclays PLC (NYSE:BCS), UBS (NYSE: UBS), Goldman Sachs Group Inc (NYSE:GS), HSBC Holdings PLC (NYSE:HSBC) and Deutsche Bank (NYSE: DB). JPMorgan Chase & Co. (NYSE:JPM) picked up three awards in the FX Market Best Banks Awards 2022, whereas Barclays PLC (NYSE:BCS) won two.
Pound or Dollar?
Looking at the pound dollar exchange rate– 1 pound for 1.27 dollars– one would reach the conclusion that pound is worth more than the dollar. However, this does not paint the whole picture. A holistic understanding of a currency’s strength is based on various factors over a long period of time, as explained before. While one pound is more than a dollar, the fact that the U.S. dollar is the world’s reserve currency and the world’s most traded currency, cannot be negated. In addition, the US economy is also much stronger.
Furthermore, the British pound at one point used to be five times higher than US dollar. However, with the loss of British sovereignty over many countries, two grueling world wars and other negative situations, the pound now falls in the one to two dollar range only. The concept of relativity of strength becomes crucial here. A currency should be considered strong or weak by looking at its relative rise and fall with other currencies, over time.
Let’s now head to the list of the most powerful currencies in the world in 2024.
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Methodology
To rank the 15 strongest currencies in the world, we have used three metrics that have also been applied in our article on most powerful currencies of the world: the recognition of the currency in the world foreign currency reserve, its foreign exchange trade volume, and its strength on face value in terms of exchange rate. Rankings are based on a mix of both qualitative and quantitative factors.
It is to be noted that 94% of all foreign currency reserves are held in just five currencies. Around 90% of the daily Forex trading volume is made up of 11 currencies.
Our 1-11 rankings are made on these two datasets. Rankings 12-15 have been made based on the strength of their face value in the foreign exchange market, since numbers for their share as the global reserve currency and daily Forex trading were too small to be considered among ‘others’.
Share of reserve currencies and Forex trade volume have been considered as a greater yardstick than exchange rate to measure the power of currencies due to the fact that exchange rates alone do not present a complete picture.
Composition of global currency reserves have been obtained from a 2022 report released by the International Monetary Fund (IMF). CMC Markets, which is a UK-based financial services company, and Forex.com, a subsidiary of StoneX Group Inc. (NASDAQ:SNEX) were used for information related to Forex trading volumes and exchange rates.
Exchange rates, in terms of USD, as of the writing of this piece, have also been mentioned.
By the way, Insider Monkey is an investing website that tracks the movements of corporate insiders and hedge funds. By using a similar consensus approach, we identify the best stock picks of more than 900 hedge funds investing in US stocks. The top 10 consensus stock picks of hedge funds outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). Whether you are a beginner investor or professional one looking for the best stocks to buy, you can benefit from the wisdom of hedge funds and corporate insiders.
Here’s the list of the world’s strongest currencies in 2024.
15 Most Powerful Currencies in the World in 2024
15. Jordanian Dinar
At the start of our list we have Jordanian Dinar, or JOD, the official currency of Jordan after its independence in 1950. On the exchange rate, JOD is considered as the fourth strongest currency in the world against the U.S. Dollar.
According to a report, the Jordanian Dinar, along with the Israeli shekel, is commonly used in the West Bank as well by Palestinians. The currency has proven to be very stable, even managing to stay strong in the current global scenario and so has become one of the strongest currencies in the world. 1 Jordanian Dinar can be exchanged for 1.41 U.S. Dollars as we speak.
14. Omani Rial
Omani Rial or OMR, is Oman’s national currency. It is also divided into 1,000 divisions called ‘baiza’. The currency derives its importance from the country being a successful oil exporter as well as the currency being pegged to the U.S. Dollar. It particularly holds importance in the Forex trade market due to trade with Middle East and North African area (MENA).
For every 1 Omani Rial you will get 2.60 U.S. Dollars, which, in this regard, makes it over 2 times more powerful than Pound Sterling.
13. Bahraini Dinar
Introduced in 1965, Bahraini Dinar is the official currency of Bahrain and one of the most powerful currencies in the world due to the country’s oil exports. The currency is not only pegged to the U.S. Dollar but also to other undisclosed basket of international currencies to attract foreign investments. Like other gulf currencies, Bahraini Dinar is also divided in 1000 “fils”.
The Dinar is an extremely stable currency and an acceptable form of international trade. However, it is mostly used within the country only. The exchange rate for 1 Bahraini Dinar is 2.66 U.S. Dollars.
12. Kuwaiti Dinar
Kuwaiti Dinar is one of the strongest performing currencies in the world against the U.S. Dollar in terms of value in the foreign exchange market. Created in 1960, its currency code is KWD and it is divided in 1000 “fils”– smaller currency units.
The Dinar’s value is dependent on the major global export of the country–oil. Strict regulations concerning the flow-in and out of the country has proved very valuable in stabilizing the currency as this policy controls speculation and volatility. You will receive 3.26 U.S. Dollars in exchange for 1 Kuwaiti Dinar as we speak.
11. Singapore Dollar
Singapore Dollar is the national currency of Singapore and is also used in Brunei. It makes-up for nearly 1.8% of all Forex trade daily. There are 100 cents in 1 Singapore Dollar.
The Monetary Authority of Singapore issues bank notes in six denomination and backs the currency with various assets like gold, silver and other assets held by the authority. The central bank’s policy to keep the nominal exchange rate fixed has proved effective in keeping it very stable and therefore, it is also one of the strongest currencies in the world.
The country is a major global financial hub, and in 2020, Goldman Sachs Group Inc. (NYSE:GS) announced that it would join JPMorgan Chase & Co. (NYSE:JPM) in building a Forex trading center in Singapore. Exchanging 1 Singapore Dollar will get you 0.75 U.S. Dollars in the Forex market.
10. New Zealand Dollar
The New Zealand Dollar, NZD or “Kiwi”, introduced in 1967, is 10th among the world’s most traded currencies. While once pegged to the US dollar, it now floats freely in the foreign exchange market and seems to have reached this place due to strong national GDP growth, high interest rates and political stability.
Dairy prices– especially milk powder- and tourism numbers have been identified as two crucial factors that have an impact on the currency, since the country is a heavy exporter of the former and has a 6% contribution of the latter in the GDP. Furthermore, due to a high yield, the kiwi is also popular for carry trades.
With a greater share of trade with China and Australia, the connection between the currencies is also quite strong. The AUD/NZD pair is one of the most popular pairs traded. In addition, for every 1 NZD, you will receive 0.62 USD.
9. Hong Kong Dollar
As one of the most traded currencies, it sits at the 9th position in the world’s most traded, despite not having any place in the world foreign exchange reserves. Interesting to note is the international financial trading and financial services center status of the country. Coupled with tourism and manufacturing, the currency is enjoying its place in the strongest currencies in the world in 2024.
It is also used in Macau, in addition to Macau pataca. The Hong Kong Dollar (HKD), is controlled by the Hong Kong Monetary Authority.
The HKD has been pegged to the U.S. Dollar since 1983, at a rate between 7.75 and 8.75. The Hong Kong Monetary Authority is present to keep track of any adjustments needed. 1 Hong Kong dollar gets you 0.13 U.S. Dollars.
8. Swiss Franc
The Swiss Franc, holding a place in the world’s foreign exchange reserves and ranked as no. 8th in the most traded currencies, is the national currency for Switzerland as well as Liechtenstein. The most notable fact is the high value of the currency compared to the US dollar. 1 Swiss Franc is equal to 1.17 U.S. Dollars. Multifarious reasons have been propounded as the cause of this trend.
For one, the country has for long established a sense of fiscal responsibility and maintained a low debt rate. Second, the country contains assets like gold reserves and last but not the least, it is considered a “safe-haven” and most stable currency in the world for many investors, especially amid war scenarios.
It also has a closed-door banking system. UBS Group AG (NYSE:UBS) — a financial service company and investment bank– is co-headquartered in Zurich and Basel.
7. Canadian Dollar
As one of the most widely Forex traded currency — 6th place for global trading and accounting for about 5% of daily trades on global foreign exchange market — Canadian dollar occupies the seventh place in the world’s most traded currencies and is also one of the strongest currencies in the world in 2024.
With a robust revenue generating export system – comprising 75% of the country’s exports in gold, lumber, agricultural products and crude oil, with its southern neighbor — the currency is subject to fluctuations in these commodity prices. On the Forex market, 1 Canadian dollar –also known as “Loonie” — will get you 0.75 U.S. Dollars.
6. Australian Dollar
AUD — the Australian Dollar — is one of the most stable currencies, top G-10 performer after the Canadian dollar in 2022, and is also the 6th among the world’s most traded currencies. It has a trade volume of $479 billion in the Forex market, according to StoneX Group Inc. (NASDAQ:SNEX) and is the 5th most traded currency on Forex market, contributing 6.8% to daily trades.
Reserve Bank of Australia manages the currency and the high interest rates are an attractive selling point as well. Due to a high commodity linkage of the currency to export goods like gold, coal, and iron ores, changes in the price are bound to have an impact on currency value. For every 1 Australian Dollar, the exchange rate is 0.67 U.S. Dollars.
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Disclosure: None. 15 Strongest Currencies in the World in 2024 is originally published on Insider Monkey.