The United Nations recognizes 180 national currencies globally as Legal Tender. These currencies fall under the category of Fiat money. The strength of a currency depends on the demand and supply of the currency and the economic health of a country. Although the US dollar is the most widely used currency, USD remains at the top concerning demand. Still, some countries have much stronger currencies than USD primarily because of their economic stability. Moreover, the strength of a currency depends on many other factors like GDP, employment rate, inflation, interest rates, and global geopolitical events. This article covers the top 10 most powerful currencies in the world.
The Benchmark of Strength
As discussed in the introduction, the strength of a currency depends on various factors, so it is challenging to consider all those variables in a single idea. Involving multiple variables may change the result. Hence, we will set the bar as the relative price of a currency to the US dollar because the US dollar is a widely accepted currency in the world.
What is the Exchange Rate, and How is it Decided?
The exchange rate or Forex (Foreign Exchange) rate is the most widely used term for studying currencies. The exchange rate is the relative value of a currency to another currency like EUR/USD (Euro to USD).
Most national currencies are free-floating (the demand and supply and other variables decide the currency’s value). Some are pegged currencies (currencies whose value is tied or pegged to another currency, usually a stronger one or a group of currencies). Pegging aims to stabilize domestic currency and facilitate global trade by providing a fixed/ stable exchange rate.
Governments peg and maintain the pegging of their domestic currencies, usually with the U.S. dollar. To maintain the tie, governments actively manage the exchange rate whenever there are divergences from the exchange rate. Some examples of currencies pegged to the U.S. dollar are Saudi riyals (SAR) and Hong Kong dollars (HKD).
Top 10 Most Powerful Currencies in The World
While talking about the strength of a currency, here are the top 10 most powerful currencies in the world.
1. Kuwaiti Dinar (KWD)
The Kuwaiti dinar is the most powerful currency in the world, considering the above benchmark. Kuwait is a small country with an area of 17,818 km2; it lies in the Persian Gulf and is one of the six countries of the Gulf Cooperation Council (GCC). The petroleum industry primarily runs the economy of Kuwait.
KWD was introduced in 1960. Initially, it was pegged to GBP. However, the GBP was changed later with another group of currencies. On 10th Feb 2024, one KWD equals 3.25 U.S. dollars.
1KWD = 3.25 USD
2. Bahraini Dinar (BHD)
It is also a tiny Gulf state located between Saudi Arabia and Qatar in the Persian Gulf. Bahrain is the third smallest country in Asia, with an area of 786 km2. Bahrain’s economy depends on the export of oil and gas.
BHD is the second most powerful currency in the world. It was introduced in the mid-60s. BHD is pegged with the U.S. dollar. Currently, on 10th Feb, one BHD equals 2.65 U.S. dollars.
1 BHD = 2.65 USD
3. Omani Rial (OMR)
The Omani Rial is the third most potent currency in the world. Oman is also a comparatively small country (309,500 km2) in the Gulf region. Like other Gulf countries, Oman’s economy also depends on the export of oil and gas.
OMR was introduced in the mid-1970s, and since then, it has been pegged to the U.S. dollar. One Omani Rail equals 2.60 U.S. dollars.
1 OMR = 2.60 USD
4. Jordanian Dinar (JOD)
Jordan is also a tiny Arabian country with an area of 89,342 km2. It is a landlocked country situated on the east bank of the Jordan River. JOD is the fourth most powerful currency in the world. Unlike its neigh boring countries, Jordan has no oil and gas reserves; its economy depends on clothing, tourism, and chemical products.
JOD became Jordan’s official currency in the mid-1950s. It is also pegged against the U.S. dollar since its inception. Currently, one JOD equals 1.41 U.S. dollars.
1 JOD = 1.41 USD
5. British Pound (GBP)
Britain has ruled the world for hundreds of years. After the Industrial Revolution, Britain remained a global economic and military giant till the Second World War. GBP is one of the oldest opted currencies in the world. Britain’s economy is the sixth largest in the world in 2024. Its economy primarily depends on tourism, manufacturing, and financial services.
GBP is currently the fifth most powerful currency in the world. It is not pegged to any other currency but a free-floating one. GBP/USD has seen many ups and downs for the past few years because of the global geopolitical environment. At the current rate, One GBP equals 1.26 U.S. dollars.
1 GBP = 1.26 USD
6. Gibraltar Pound (GIP)
Gibraltar is a small British overseas territory that lies between Africa and Europe in the Iberian Peninsula. Gibraltar is famous for the Strait of Gibraltar, which is the only waterway between the Atlantic Ocean and the Mediterranean Sea. The Strait of Gibraltar is one of the busiest waterways for trade, and the shipping industry is the main lifeline of Gibraltar’s economy.
GIP is the sixth most powerful currency in the world. It was opted in 1927. At the current exchange rate, one Gibraltar Pound equals 1.263 U.S. dollars.
1 GIP = 1.263 USD
7. Cayman Island’s Dollar (KYD)
The Cayman Islands is a tiny Caribbean British territory with an area of 264 square km. The Cayman Islands’ economy depends on tourism and financial services as it is an offshore territory.
KYD is the seventh most powerful currency in the world. It was opted as the Cayman Islands’ currency in 1972, replacing the Jamaican dollar. It has been pegged to the U.S. dollar since then. At the current exchange rate, one KYD equals 1.26 U.S. dollars.
1 KYD = 1.20 USD
8. Swiss Franc (CHF)
Switzerland is located in central Europe and is one of the most visited countries in the world. Switzerland is the most stable country economically, according to a recent report. The GDP per Capita of Switzerland is the highest in the world. The tourism industry, high-end luxury products, and financial services are major contributors to the Swiss economy.
CHF is the eighth most powerful currency in the world. It was introduced in the early 1850s; CHF is not pegged to any currency (though it was pegged to the Euro). At the current exchange rate, one Swiss Franc equals 1.14 U.S. dollars.
1 CHF = 1.14 USD
9. Euro (EUR)
The Euro is the currency of most countries of the European Union. This region where the Euro is accepted as a currency is called the Eurozone (with twenty members). The Euro became an official currency in the early 2000s. It is not pegged to any other currency but a free-floating one.
The Euro is the 9th most powerful currency in the world. Because the Eurozone includes many economic giants like Germany, France, etc. At the current exchange rate, one Euro equals 1.08 U.S. dollars.
1 EUR = 1.08 USD
10. U.S. Dollar (USD)
The United States is the largest economy in the world. The U.S. dollar is the most widely used and accepted currency globally. Almost half of the global trade involves USD, and around 90% of forex transactions involve USD. The demand for USD is highest among all currencies because of its involvement in global trade, remittances and in the form of forex reserves for other countries.
According to our set criterion, the U.S. dollar is the tenth most powerful currency in the world. USD was adopted as a legal tender by the U.S. government in 1785.
Bottom Line
This article summarizes the top 10 most powerful currencies in the world. The strength of a currency depends on various factors, including the demand and supply of the currency, economic stability, GDP, inflation, interest rates, and global geopolitical events. However, the relative rate of a currency to USD is a parameter set in this article to gauge the strength of a currency. The article lists the top 10 most powerful currencies, with the Kuwaiti dinar being the most potent currency, followed by the Bahraini dinar and Omani rail. Interestingly, the top countries belong to the Gulf region.
