According to the list by Forbes for the year 2024, the top 10 currencies in the world are dominated by the US Dollar. Forbes’ analysis reveals that the Kuwaiti Dinar holds the position of the world’s strongest currency, followed by the Bahraini Dinar, Omani Rial, Jordanian Dinar, British Pound, Gibraltar Pound, Cayman Islands Dollar, Swiss Franc, Euro, and the American Dollar, in that order.
Despite the widespread use of the American Dollar in transactions worldwide, it’s noteworthy that, among the 180 currencies recognized by the United Nations, the U.S. Dollar does not hold the official title of the world’s most powerful currency. Despite being the largest global economy, the United States has not autonomously established the American Dollar as the foremost currency globally.
The strength of a currency is evaluated within the global commerce framework, reflecting not only a country’s economic prowess but also influencing its overall economic resilience. An increase in a currency’s power fosters confidence in the nation’s economy, making it appealing for investments and enhancing international participation. Over several decades, the United States Dollar has generally been acknowledged as the most dominant global currency.
A nation’s currency functions as a dynamic gauge, providing insights into its economic strength and stability. The fluctuating values of currencies have widespread effects on economic aspects such as investments and the pricing of goods. It is essential to analyze the intrinsic and extrinsic factors guiding a nation’s foreign exchange value.
Kuwaiti Dinar: One Kuwaiti Dinar can be exchanged for $3.25, or alternatively, it can be obtained for Tk356.63. The strength of the Kuwaiti Dinar reflects its economic stability driven by abundant oil reserves and a tax-free system.
Bahraini Dinar: A single Bahraini Dinar is valued at $2.65, or it can be acquired for Tk290 in Bangladesh.
Omani Rial: The exchange rate for one Omani Rial is $2.60, equivalent to Tk154.74 in Bangladesh.
Jordanian Dinar: Acquiring one Jordanian Dinar translates to $1.41 or Tk285.17 in Bangladesh.
British Pound: A British Pound is valued at $1.27, and on the other side, it can be obtained for Tk139.20.
Gibraltar Pound: One Gibraltar Pound is valued at $1.28, while it can be acquired for Tk131.67.
Cayman Island Dollar: The exchange rate for one Cayman Island Dollar is $1.20, and in return, it is equivalent to 132 tk.
Swiss Franc: A single Swiss Franc is valued at $1.17, and it can be obtained for Tk126.29. The Swiss Franc is widely regarded as one of the most stable currencies globally.
Euro: Acquiring one Euro amounts to Tk119.38, or it can be obtained for Tk120.
US Dollar: The exchange rate for One US Dollar is valued at Tk109.77. Despite being the most widely traded currency globally and the primary reserve currency, the US Dollar ranks 10th among the world’s strongest currencies.
It’s important to note that these values are subject to fluctuations, as mentioned in Forbes’ disclaimer accompanying the list. Understanding the strengths and intricacies of these currencies is essential for navigating the complex landscape of international finance.
Why the world is turning away from the US dollar
Escalating Geopolitical Tensions:
As non-Western nations assert themselves globally, heightened geopolitical tensions with the West are anticipated, potentially leading to a diminished role for the US dollar on the global economic stage.
Strategic Sanctions and Currency Weakening:
The US Treasury Department’s imposition of unprecedented sanctions on Russia post the Ukraine invasion aimed to weaken Russia’s currency support. This strategic move sought to constrict global ruble supplies, restricting Russia’s access to stabilizing reserves.
Broader Shift Away from the US Dollar:
Freezing a sovereign country’s dollar holdings, exemplified in Russia’s case, carries significant consequences, possibly triggering a broader international shift away from the US dollar in trade and investment.
Emerging Trends in International Trade:
The geopolitical aftermath has prompted countries, especially those with divergent interests from the US, such as China and Gulf states, to explore alternatives to the US dollar. China’s use of its own currency for settling payments, along with China and Saudi Arabia’s currency swap agreement, signals a growing trend away from the US dollar in global finance and trade dynamics.
Strength of a Currency
Traders and Speculators
Lots of speculation and market sentiment influence the forex market. Investors and Trading View traders base their investments and trades on market predictions, economic conditions, global events, and lots more. Events and news influence speculation and can cause fluctuations in forex exchange rates.
Economic Performance
This is a significant determinant of a currency’s strength. An excellent economic performance will feature stable or growing GDP (Gross Domestic Product) and low unemployment rates. A stable and growing economy attracts foreign investors to a country, which drives up FX demand.
On the other hand, a declining economy has high unemployment rates, which can prompt the Central Bank to reduce interest rates. This makes investment in that country unattractive and can cause existing foreign investors to relocate.
Exchange Rate Policies
The policies implemented by the government and its central bank always directly impact the valuation of its exchange rate. Fiscal and Monetary policies are central banks and governments’ primary tools to control exchange rates. They can decide to devalue or revalue using these tools.
Interest Rates
The interest rate in a nation is usually set by its central bank, which indirectly impacts its currency strength. Higher interest rates attract foreign capital because they offer the potential for greater returns on investments. Therefore, a country with higher interest rates often experiences appreciation. A lower interest rate can cause depreciation. Lower rates make it less appealing to invest in a nation, as they yield lower investment returns.
Global Economic Factors
Global conditions play a role in influencing strength. Trading partners directly affect the value of each other’s currencies. For instance, when a trading partner experiences economic growth, they can increase demand, strengthening the currency of the supplying country. This theory goes both ways: a reduction in demand from major buyers will lead to depreciation in the supplying nation.
Inflation Rates
A country with a stable or low inflation rate will likely have a strong currency. High inflation rates reduce purchasing power, making investing unattractive to investors. Existing investors will sell their investments, thereby leading to depreciation. In contrast, a low inflation rate retains purchasing power, which can attract investors and lead to appreciation.
Trade Balance
A country’s trade balance (BOT) is the difference between exports and imports. A trade surplus is when its exports are more significant than its imports, while a deficit is when its imports exceed its exports. A trade surplus increases the value of a country’s currency because there is more demand for it. This demand comes from buyers of the country’s goods and services. Conversely, a deficit can weaken it because more people will sell than buy.
Political Stability
A stable government creates the ideal environment for foreign investors, who are more likely to invest in a politically stable country. This will, in turn, strengthen the country’s currency as more and more investors buy it.
