In this article, we look at the 5 most powerful currencies in the world. To view the complete list and see how we ranked these currencies, you can head to the 15 Most Powerful Currencies in the World.
5. Chinese Yuan
Chinese renminbi, or yuan, is the fifth strongest currency in the world, with a 3% global reserve currency share. Moreover, it is also one of the most traded currencies in the world, with a daily volume of over $520 billion. China, using its growing role in the international economy, has in recent years made efforts to internationalize the currency by promoting its use in trade and investment. According to a report, around 8 countries have begun or are considering to trade with China in yuan, instead of the U.S. Dollar. In the forex market, 1 Chinese Yuan will buy you 0.14 U.S. Dollars.
4. Pound Sterling
With about $968 billion in daily forex trade and a 5% reserve currency share in central banks across the world, the British Pound Sterling is one of the most powerful currencies in the world. It is also one of the oldest, dating back to Anglo-Saxon times.
It was the global reserve currency during the 19th century and first half of the 20th century, before the U.S Dollar’s dominance began. It is abbreviated as GBP and is also one of the most valuable currencies on face value in terms of exchange rate. Exchanging 1 Pound will get you 1.25 U.S. Dollars. Barclays PLC (NYSE:BCS) was declared as the best bank in 2022 for GBP/USD forex trade at FX Markets Awards.
3. Japanese Yen
The Japanese Yen has a 6% share as the global reserve currency and trumps the Pound to be ranked third. It is also the third most traded currency in the world with a daily trade volume of $1.2 trillion. The JPY is valued by investors for its low inflation rate and low interest rates due to an aging population. The Japanese government has deliberately devalued the yen to encourage exports and trade. Goldman Sachs Group Inc (NYSE:GS) declared yen to be the cheapest and safest asset to invest in. 1 Japanese yen would get you 0.0072 U.S. Dollars in return. That means 1 U.S. Dollar equals about 139 Japanese yen.
2. Euro
With a 21% share in reserve currency, and over $2.3 trillion of daily forex trade, the Euro is the second most powerful currency in the world. It is the official currency of the European Union (EU) and is managed by the European Central Bank (ECB). It is used by 19 members of the EU, which helps them avoid currency conversion costs when conducting international trade. Having a common currency also helps encourage economic activity among the member states. 1 Euro exchanged in the forex market will get you 1.08 U.S. Dollars.
1. U.S. Dollar
The U.S. Dollar, or the USD, is the most powerful currency in the world, and that comes as no surprise. It is pretty much the most desirable currency in the world no matter where you live or travel to. A street vendor in Baghdad or a waiter in Istanbul will likely accept the U.S. Dollar as payment or tip. The currency has universal recognition and is the most traded currency in the world.
It accounts for nearly 85% of all forex trade with a volume of about $6.6 trillion, as of the present. According to the International Monetary Fund (IMF), around 59% of the global foreign reserves in central banks of different countries are maintained in USD, which has earned the greenback the status of a global currency.
The USD has been the world’s most dominant currency since World War II and continues to keep this status and is the preferred currency for investors during times of financial distress, because they expect it to retain its value. A number of countries have pegged the values of their currencies to the U.S. Dollar, including Saudi Arabia, Qatar, the United Arab Emirates, and Hong Kong. Seven countries recognize the USD as legal tender in a process known as dollarization. These include Ecuador and Zimbabwe, among others.
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