Most 10 strongest currencies in the world in 2024: Latest comparison by Digimagg

Have you pondered about the world's most robust currency or why oil-exporting countries exhibit some of the highest foreign exchange rates? This article delves into the top 10 strongest currencies globally, analyzing their exchange rates against the US dollar (USD) and elucidating the factors influencing their strength.

What exactly does currency strength mean?

Currency strength indicates how much buying power a currency holds in comparison to others. The US dollar is selected as the standard due to its global dominance. Data from the Bank for International Settlements' Triennial Central Bank Survey shows that the US dollar was involved in 88% of all foreign exchange trades from 2019 to 2022.

How are foreign currencies valued?

The majority of global currencies operate under a floating exchange rate system, where their forex rates are established by the open market according to their supply and demand in comparison to other currencies. Alternatively, certain currencies are "pegged" to a reference currency, indicating their exchange rate is fixed at a prearranged rate against another currency.

What factors contribute to a currency's strength?

Various factors influence currency strength, such as inflation rates, political stability, and economic prospects. Here, we highlight the three primary fundamental factors that play a significant role in elevating a nation's fiat currency to a position of global strength.

Interest Rate Differentials

Central bank interest rates impact currency demand and consequently affect forex rates. However, disparities in interest rates between different economies, known as interest rate differentials, dictate capital movement. For instance, if interest rates decrease in India while rising in other global economies, Indian asset returns become less appealing to investors. Consequently, investors may sell Indian assets in favor of higher-yielding sovereign assets elsewhere. Interest rates are influenced by various factors, with inflation rates being a primary determinant. Elevated inflation rates typically prompt central banks to raise interest rates.

Capital Controls

Central banks play a crucial role in shaping a currency's performance. While some central banks opt for greater intervention in forex rates, others are less involved. For instance, the Bank of Japan is renowned for actively managing the Japanese yen to uphold a desired exchange rate conducive to its trade objectives.

Meanwhile, governments in Middle Eastern countries such as Kuwait maintain fixed exchange rates for their currencies, either pegged to the US dollar or a basket of global currencies. These governments closely monitor foreign exchange activities to curb currency speculation and volatility.

Terms of Trade

Terms of trade indicate the ratio of a country's export prices to its import prices. Typically, when a nation's terms of trade improve, its currency tends to appreciate, whereas a decline in terms of trade often leads to currency depreciation.

For instance, let's consider Australia, a nation that relies heavily on commodity exports such as iron ore. If there's a surge in demand for iron ore due to a boom in Asian property markets, Australia's export earnings would surpass its import expenditure. This influx of capital into Australia fosters a positive economic outlook, prompting increased demand for the Australian dollar among money market investors and traders, thus driving up its value.Commodity prices play a significant role in influencing terms of trade.

Best 10 strongest currencies in the world

Below are the top-performing currencies globally in 2024:

1. Kuwaiti Dinar (KWD)

In 2023, the Kuwaiti dinar (KWD) stood out as the most valuable currency against the US dollar. The KWD is fixed to a basket of global currencies whose specifics are undisclosed, resulting in a KWD/USD rate of 3.25 as of January 30, 2024.Kuwait's prosperity stems mainly from its exports of crude oil. As per the OEC, the country recorded exports worth $58.2 billion in 2021, while imports totaled $33.8 billion.

2. Bahrain Dinar (BHD)

Bahrain, situated as an island nation in the Middle East between Qatar and Saudi Arabia, primarily exports petroleum products, raw aluminum, and iron ore.As of the latest data, the Bahrain Dinar ranked as the second most valuable currency against the US dollar, with BHD/USD exchange rates fixed at 2.65.

3. Omani Rial (OMR)

Oman, situated as a coastal nation in the Middle East bordered by Saudi Arabia, Yemen, and the UAE, relies heavily on its oil exports for its economy. According to OEC data, Oman primarily exports petroleum-related products to China, India, the UAE, South Korea, and Saudi Arabia.The Omani rial (OMR), Oman's national currency, ranked third among the world's strongest currencies. The exchange rate of OMR/USD is fixed at 2.6.

4. Jordan Dinar (JOD)

Jordan, located in the Middle East and bordered by Saudi Arabia, Iraq, Syria, and Israel, has key exports including fertilizers, knit garments, calcium phosphates, and phosphoric acid. Its primary export partners are the US, India, Saudi Arabia, Iraq, and China.As of January 30, 2024, the Jordanian dinar ranked fourth among the world's strongest currencies, with the JOD/USD exchange rate at 1.4.

5. British Pound (GBP)

The British Pound is highly liquid, being traded in foreign exchange markets almost as frequently as the US dollar, Euro, and Japanese Yen between 2019 and 2022.

According to the OEC, the UK's major exports include cars, gold, gas turbines, crude petroleum, and packaged medicaments, with top export destinations being the US, Germany, Netherlands, Ireland, and Switzerland. However, in 2021, the UK experienced a trade deficit as imports surpassed exports by $261 billion.As of January 30, 2024, the GBP/USD exchange rate stood at 1.2675, positioning the British Pound as the fifth strongest currency globally.

6. Gibraltar pound (GIP)

Gibraltar, situated on the southern tip of the Iberian Peninsula and bordering Spain, is a British Overseas Territory. Its economy relies significantly on the financial services sector. As a British Overseas Territory, Gibraltar's foreign policy is overseen by the UK, meaning it is not a part of the European Union.

The currency used in Gibraltar is the Gibraltar pound, which is fixed at par with the British pound. This pegging positions it as the sixth strongest currency in the world against the USD, with GIP/USD rates standing at 1.2675 as of January 30, 2024.

7. Cayman Island Dollar (KYD)

The Cayman Islands, situated in the Caribbean Sea, is a self-governing British Overseas Territory. It's renowned as one of the premier tax havens globally due to its lack of corporate income taxes.The Cayman Islands dollar (KYD) is pegged to the US dollar at a fixed rate of 1.2, placing it as the seventh strongest currency globally against the USD.

8. Swiss Franc (CHF)

The Swiss Franc is widely coveted as a safe-haven currency, renowned for its ability to maintain or appreciate its value amidst global economic downturns.As of January 30, 2024, the Swiss Franc (CHF) ranked as the eighth most valuable currency globally, with the CHF/USD exchange rate at 1.15.

9. Euro (EUR)

The Euro was established in 1999 and is utilized in all European Union countries except Denmark. Based on data from the BIS, the EUR was the second most traded currency globally from 2019 to 2022.As of January 30, 2024, the Euro ranked ninth among the world's strongest currencies, with EUR/USD rates at 1.08.

10. Singapore Dollar (SGD)

Singapore, recognized as a high-income economy, is distinguished by its business-friendly regulatory framework that has contributed to its economic expansion. According to OEC data, Singapore's primary exports include integrated circuits, refined petroleum, and gold. Moreover, in 2021, the city-state held the title of the world's largest exporter of glass working machines.As of January 30, 2024, the Singapore dollar (SGD) ranked tenth among the world's strongest currencies, with the SGD/USD exchange rate recorded at 0.7463.