Have you ever wondered what the strongest currency in the world is for this year, 2022? Well, neither the US dollar nor the European euro is. Rather, the Kuwaiti dinar is at the very top of the list.
The availability of future generation funds and the general reserves of the country are able to make the Kuwaiti dinar resilient against ratings or inflation. Kuwait has reserves as high as one trillion dollars, as well as assets and gold. Because of this, any changes in ratings and inflation rates will not affect the strength of the currency.
Furthermore, the monetary policies implemented by the Central Bank also protect the strength of the Kuwait dinar against fluctuations in economic conditions and other factors that may diminish its value.
List of the 10 Strongest Currencies in the World
10th Strongest Currency in the World: Canadian Dollar (CAD)
The Canadian Dollar ranks 6th among the most traded currencies and 5th in terms of the largest reserve currency in the world. Apart from that, the Canadian Dollar is the currency of choice for around 5% of the total trade in foreign exchange.
The country has to thank its natural resources for its currency strength. It has large quantities of crude oil reserves, as much as 13.21%, next to Saudi Arabia and Venezuela. The uranium supply of the country is also the second largest in the world.
However, the value of the Canadian dollar is highly dependent on changes in global prices. It also hinges on the value of the US dollar since Canada mainly exports its oil supply to the USA.
9th Strongest Currency in the World: US Dollar (USD)
The US dollar is considered the “most” in many aspects. It is the most used currency, the most traded currency, and the most reserved currency in the world. Commercial and central banks throughout different countries hold the US dollar in their reserves.
The United States of America remains the most powerful country on the globe. Despite its position being threatened by China and other similar world superpowers, it has been able to retain a strong foothold among all the countries. The US dollar is also commonly described as the “global currency” because it is widely accepted for any transaction, wherever it may be held.
As of December 31, 2020, the Federal Reserve reported that 50.3 billion USD notes are in circulation. This still excludes the USD coins that are in circulation.
8th Strongest Currency in the World: Swiss Franc (CHF)
The Swiss franc remains the safest currency in which investors can put their money. It is highly resilient against inflation because of the strict monetary policies in the country and the reliability of the government. It has been ranked as the most politically stable country based on perception.
Because of this, when financial circumstances are not favorable elsewhere, the Swiss franc is the go-to currency for investors. It can retain its high value despite the political and financial atmosphere in their respective local countries.
7th Strongest Currency in the World: European Euro (EUR)
The European euro follows the US dollar in terms of being the most reserved currency and the most traded currency across the countries.
Many individuals are also opting to save their hard-earned money in European euros, with data showing that the currency accounts for as much as 25% of savings in the world. 33% of everyday transactions done in the world also use the European euro.
Twenty-five countries have chosen the European euro as their currency peg. This means that the government has determined a fixed exchange rate for their local currency with the European euro. Implementing a currency peg allows for stable exchange rates between involved countries. This makes it easier for businesses to plan since the exchange rates can be foreseen with certainty in the long term, thereby minimizing the level of foreign exchange risk.
The European euro is the official currency used in 19 out of the 27 EU member countries. These include Austria, France, Germany, and Spain, to name a few.
6th Strongest Currency in the World: Cayman Islands Dollar (KYD)
The Cayman Islands Dollar is one of the strongest currencies in the world because of its status as a “tax haven.” Tax rates in the Cayman Islands are minimal to none for individuals and businesses coming from abroad. There are no income taxes, corporate taxes, inheritance taxes, or capital gains taxes. Almost all the profits of businesses go directly to them. Affluent individuals can also retain much of their wealth.
Apart from that, their banking laws highly protect the privacy of those who make use of banking services in the country. Corporations established by foreigners in the Cayman Islands are under no obligation to provide the government with any financial reports. They also do not need to pay stamp duty on the transfer of assets.
In the 2020 Financial Secrecy Index (FSI), the Cayman Islands was at the top of the list. This means that it would be very easy for any individual or corporation to hide their financial information from relevant authorities.
This very conducive environment makes the Cayman Islands a very popular choice for wealthy individuals, hedge funds, and multinational corporations.
5th Strongest Currency in the World: British Pound Sterling (GBP)
The British Pound Sterling ranks as the 4th most traded currency in the world.
Its currency strength lies in the interest rates and the economy of the UK. With expectations of interest rates increasing in the country, the British Pound Sterling gains more value. As such, foreign investors are more inclined to save or invest in this currency because of the possibility of higher returns. This demand for the British Pound Sterling increases its currency strength.
The economy of the UK is also growing, even going beyond what was seen before the COVID-19 pandemic happened. Its labor market was also reported to be expanding. This favorable economic atmosphere increases the value of the country’s currency.
4th Strongest Currency in the World: Jordanian Dinar (JOD)
Many attribute the strength of the Jordanian dinar to the efforts of the national government to keep the exchange rates of the currency at a fixed amount. It is pegged to the currency of the USA and, as such, has the same strength that the US dollar has. This was done to create a stable financial system within the country and avoid the negative economic effects that a fluctuating exchange rate brings about.
This stability encourages more investors to come to the Kingdom of Jordan and conduct their financial activities within the country, resulting in economic development and an improved quality of life for both nationals and residents.
As such, the strength of the Jordanian dinar does not depend on the economic situation in the country. However, despite the economic and financial situation in the country, it has been named a “frontier market economy.”
3rd Strongest Currency in the World: Omani Rial (OMR)
Because of the abundant oil resources in Oman, the economy has greatly benefited and grown. The standard of living in the country and the purchasing power of the currency are both high. With the Omani rial becoming too valuable, government authorities had to produce notes that were worth a quarter and a half of a rial.
In the face of diminishing oil resources, government authorities in the country have started to expand into other industries in an effort to increase their sources of income. In particular, the country has started investing in the sectors of metallurgy, production of gas, and tourism.
2nd Strongest Currency in the World: Bahraini Dinar (BHD)
Similar to Oman, Bahrain also has an abundance of oil resources. Because of this, the growth of the economy depends on the exportation of petroleum products. However, the country does not just depend on its economy for the strength of its currency. The exchange rate for the Bahraini dinar is also fixed and is pegged to the US dollar.
The country also accepts the Saudi riyal for any transaction made within Bahrain.
The Strongest Currency in the World: Kuwaiti Dinar (KWD)
The amount of oil accessible in Kuwait places the Kuwaiti dinar as the strongest currency. Its oil reserves account for 9% of those in the whole world.
Both the economic and financial situations in the country look optimistic because the unemployment rate is low compared to other countries. At the same time, there are no taxes in Kuwait.