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Have you ever pondered the strongest currencies worldwide or the reason oil-exporting countries typically possess the most highly valued ones?
In this article, we explore the top 15 strongest currencies in the world based on their exchange rates against the U.S. dollar (USD) and explain what factors determine their strength.
What is Currency Strength?
Currency strength is the relative purchasing power of a currency against other currencies.
The U.S. dollar was chosen as the benchmark because of its status as the world’s most dominant vehicle currency. According to the Triennial Central Bank Survey conducted by the Bank for International Settlements (BIS), the U.S. dollar was on one side of 88% of all foreign exchange (forex) trades conducted between 2019 and 2022.
What Makes a Currency Strong?
There are several factors that determine currency strength, including inflation rates, political stability, and economic outlook.
Below, we focus on the three key fundamental determinants of foreign exchange rates, which encompass all other factors.
Terms of Trade
Terms of trade refers to the ratio of a nation’s export prices to import prices. Typically, an increase in a nation’s terms of trade is associated with an appreciation of its currency while a decline in a nation’s terms of trade leads to a depreciation of the exchange rate.
Let’s take a commodity-exporting nation like Australia as our example. A boom in property markets in Asia will increase the demand for iron ore, which is Australia’s chief export. During such times, Australia’s export value will be significantly higher than its import value.
The large inflow of capital into Australia leads to a positive outlook for the nation’s economy. As a result, the Australian dollar sees an increase in demand from money market investors and traders, leading to its price appreciation.
Terms of trade are heavily influenced by commodity prices.
Interest Rate Differentials
Interest rates set by central banks affect the demand for a currency and thus influence its forex rate.
However, it is the difference in interest rates between various economies (called interest rate differentials) that determine the flow of capital. For example, if interest rates in India decline while other world economies increase their interest rates, the return on Indian assets will become less attractive to investors. The market will sell Indian assets in favor of alternative sovereign assets that offer higher returns on their investment.
Interest rates are influenced by several factors, with the inflation rate being the chief among them. Higher rates of inflation in a nation will typically force its central bank to increase interest rates.
Capital Controls
Central banks have significant influence over a currency’s performance. Some central banks choose to exert more control over forex rates than others. For example, the Bank of Japan is known to actively manipulate the Japanese yen to maintain a certain level of exchange rate that is favorable for its trade.
Governments in Middle Eastern nations like Kuwait keep their currencies pegged at a certain rate to the U.S. dollar or to a basket of world currencies. These governments keep a strict check on foreign exchange volumes to minimize currency speculation and volatility.
Top 15 Strongest Currencies in the World
Here is a list of the strongest currencies in the world in 2023:
15. Turkmen Manat (TMT)
Closing the list of the world’s strongest currencies in 2023 was the Turkmen Manat (TMT). TMT/USD stood at 0.28 as of October 2023.
Turkmenistan’s currency receives support from its petroleum exports, leading to its trade surplus. According to the OEC, the country exported goods worth $7.2 billion in 2021, compared to imports of $3.47 billion.
TMT/USD rates have fallen over 2% year-to-date in 2023.
14. New Zealand Dollar (NZD)
The New Zealand dollar (NZD) came in 14th with NZD/USD rates at 0.58 as of October 2023.
New Zealand is the world’s biggest exporter of milk. According to the OEC, the nation exported concentrated milk worth $11.1 billion in 2021. The island nation’s exports stood at $68.4 billion for 2021, higher than imports of $46.1 billion.
NZD/USD rates have dropped over 8% year-to-date in 2023.
13. Azerbaijan Manat (AZN)
The Azerbaijan manat (AZN) came in 13th on the list with AZN/USD rates at 0.58 as of October 2023.
Azerbaijan is an oil-exporting nation located in West Asia. According to the OEC, Azerbaijan exported goods worth $22.8 billion in 2021 and imported goods worth $12.3 billion.
AZN/USD rates remained unchanged through 2023.
12. Australian Dollar (AUD)
The Australian dollar (AUD) followed next with AUD/USD rates at 0.63 at the time of writing.
Like CAD, AUD is also a commodity currency due to Australia’s position as a major iron ore and coal exporter. According to the OEC, Australia exported goods worth $343 billion in 2021 and imported goods worth $251 billion.
At the time of writing, AUD/USD rates had fallen about 7% year-to-date in 2023.
11. Canadian Dollar (CAD)
The Canadian dollar (CAD) came in 11th on the list, with CAD/USD rates at 0.72 as of October 2023.
Canada is a crude oil exporting nation. CAD is also referred to as a commodity currency since its performance is closely associated with global oil prices. According to the OEC, Canada exported goods worth $484 billion in 2021 and imported goods worth $467 billion.
At the time of writing, CAD/USD rates had fallen about 2% year-to-date in 2023.
10. Brunei Dollar (BND)
The Brunei dollar (BND) closed the top ten in the list of the world’s strongest currencies in 2023. BND/USD rates stood at 0.72 as of October 2023.
Brunei is a high-income nation located in South-East Asia. According to the OEC, the nation exported goods worth $11.3 billion in 2021 compared to imports worth $7.93 billion.
At the time of writing, BND/USD rates had fallen about 2.3% year-to-date in 2023.
9. Singapore Dollar (SGD)
The Singapore dollar (SGD) was the first Southeast Asian currency on the list. SGD/USD stood at 0.72 as of October 2023.
Singapore is a high-income economy and is known for its business-friendly regulatory environment, which has helped stimulate its economic growth. According to the OEC, Singapore exported goods worth $351 billion in 2021 and imported goods worth $362 billion.
At the time of writing, SGD/USD rates had fallen about 2.3% year-to-date in 2023.
8. Euro (EUR)
The Euro (EUR) came in eighth on the list of the strongest currencies in the world. EUR/USD rates stood at 1.05 as of October 2023.
The Euro came into existence in 1999 and is adopted across all European Union states except Denmark. According to BIS, EUR was the second most traded currency in the world between 2019 and 2022.
At the time of writing, EUR/USD rates have fallen nearly 2% year-to-date in 2023.
7. Swiss Franc (CHF)
The Swiss Franc (CHF) was the seventh most valuable currency against the USD in 2023. The CHF/USD rate stood at 1.11 as of October 2023.
The Swiss Franc is a highly sought-after currency due to Switzerland’s dominance in the financial services business. The country is home to one of the world’s largest private banks – UBS Bank. According to the OEC, Switzerland posted an export value worth $371 billion in 2021 compared to an import value of $328 billion.
At the time of writing, CHF/USD rates gained 2.8% year-to-date in 2023.
6. Cayman Islands Dollar (KYD)
The Cayman Islands dollar (KYD) came in next, with the KYD/USD rate at 1.2 as of October 2023.
The Cayman Island is a self-governing British Overseas Territory located in the Caribbean Sea.
The KYD also remained largely unchanged against the U.S. dollar through the course of 2023.
5. British Pound (GBP)
The inclusion of the British Pound (GBP) snapped the Middle East’s dominance in the list of the world’s strongest currencies. GBP/USD stood at 1.209 as of October 2023.
The GBP remained a highly liquid currency, with only the U.S. dollar, Euro, and Japanese Yen traded more than the sterling in foreign exchange markets between 2019 and 2022. According to the OEC, the UK posted an export value worth $420 billion in 2021 compared to an import value of $681 billion.
At the time of writing, GBP/USD rates remained close to flat in 2023. However, GBP did make a high of 1.314 during the year.
4. Jordan Dinar (JOD)
The Jordan dinar (JOD) came in fourth on the list of the strongest currencies in the world. The JOD/USD stood at 1.4 as of October 2023.
Jordan’s main export differed from its neighbors as the nation earned the most from exporting fertilizers. According to the OEC, Jordan posted an export value worth $12 billion in 2021 compared to an import value of $24.6 billion.
The Jordan Dinar also remained largely unchanged against the U.S. dollar through the course of 2023.
3. Omani Rial (OMR)
Oman’s national currency, called the Omani rial (OMR), was third on the list of the highest currencies in the world. The OMR/USD stood at 2.59 as of October 2023.
Oman’s chief export was crude products. According to the OEC, Oman posted an export value worth $56.9 billion in 2021 compared to an import value of $34 billion.
OMR/USD exchange rates remained unchanged in 2023.
2. Bahrain Dinar (BHD)
The Bahrain dinar (BHD) was the second highest-valued currency against the U.S. dollar in 2023. The BHD/USD stood at 2.65 as of October 2023.
Like Kuwait, Bahrain’s chief export was petroleum products. In addition, the Middle Eastern country also exported aluminum and iron ore. According to the OEC, Bahrain posted an export value worth $ 15 billion in 2021 compared to an import value of $15.5 billion.
BHD/USD exchange rates remained unchanged in 2023.
1. Kuwaiti Dinar (KWD)
The Kuwaiti dinar (KWD) was the most valuable currency against the U.S. dollar in 2023. The KWD/USD stood at 3.23 as of October 2023.
Kuwait’s wealth is primarily derived from crude oil exports. According to the OEC, the nation posted an export value worth $58.2 billion in 2021 compared to an import value of $33.8 billion.
KWD/USD has remained close to flat (down 1.3% at the time of writing) during the course of 2023.
The Bottom Line
It is important to note that this list compiles the currencies with the highest exchange rates against the U.S. dollar. However, valuation alone does not make a currency popular.
A number of currencies on the list are not popular among investors due to strict capital controls and regulations imposed by their respective governments.
