The US dollar is generally seen as the most powerful currency in the world, and it’s certainly the most-traded currency on the global stage by some margin.
However, perhaps surprisingly, the ‘greenback’ is not the strongest of the 180-odd traditional ‘fiat’ currencies recognised as legal tender worldwide.
Here’s a look at the top 10 strongest currencies in the world, based on their relative value against the US dollar.
How Is Foreign Currency Priced?
Foreign currency is traded in pairs, for example, buying US dollars with Australian dollars. As a result, currency is always priced relative to another currency, known as the ‘exchange rate’.
Most currencies are ‘floating’, meaning their value fluctuates depending on demand and supply. However, some currencies are ‘pegged’, which means their value relative to another currency (such as the US dollar) is fixed at an agreed rate. The Australian dollar, for example, was pegged to the US dollar until 1983, but now operates on a floating exchange rate, whereby the value of the Australian dollar rises and falls according to supply and demand factors.
Exchange rates affect the cost of goods and services in a foreign currency. For example, if the Australian dollar weakens against the US dollar, a holiday in the United States would cost more in AUD terms. As of August 1, one Australian dollar is worth exactly 67 cents, which is a far cry off from a little more than a decade ago when the AUD achieved parity with the greenback, and prompted a flurry of bookings to Hawaii.
Holidays aside, exchange rate movements also create an opportunity for investors looking to make a profit from trading in foreign exchange.
Note that any form of market-based investment or speculation puts all your capital at risk. Investments can go up and down in value, so you may lose some or all of your money. Leveraged products such as contracts for difference are highly speculative and carry the additional risk of losing money beyond that originally staked.
What are the Top 10 Strongest Currencies?
We’ve analysed the strongest currencies, based on the number of units of foreign currency received in exchange for one US dollar. The exchange rates are sourced from our currency converter, based on data from Open Exchange as at the time of writing.
Let’s take a look at the strongest currencies in the world—the results may surprise you.
1. Kuwaiti dinar (KWD)
The Kuwaiti dinar is the strongest currency in the world with 1 Kuwaiti dinar buying 3.26 US dollars (or, put another way, US$1 equals 0.31 Kuwaiti dinars).
Kuwait is located between Saudi Arabia and Iraq, earning much of its wealth from being a leading global exporter of oil. The Kuwaiti dinar was introduced in the 1960s and was initially pegged to the British pound before being re-pegged to an undisclosed basket of currencies.
2. Bahraini dinar (BHD)
The Bahraini dinar is the second strongest currency in the world with 1 Bahraini dinar buying 2.65 US dollars (or US$1 equals 0.38 Bahraini dinars).
Bahrain is an island nation in the Persian Gulf off the coast of Saudi Arabia. Like Kuwait, the country earns much of its wealth from oil and gas exports. The Bahraini dinar entered circulation in 1965 and is pegged to the US dollar.
3. Omani rial (OMR)
The Omani rial is the third strongest currency in the world with 1 Omani rial buying 2.60 US dollars (or US$1 equals 0.38 Omani rial).
Oman sits between the United Arab Emirates and Yemen at the tip of the Arabian peninsula. As with its other wealthy neighbours, Oman is a major exporter of oil and gas. The Omani rial was introduced in the 1970s and is pegged to the US dollar.
4. Jordanian dinar (JOD)
The Jordanian dinar is the fourth strongest currency in the world with 1 Jordanian dinar buying 1.41 US dollars (or US$1 equals 0.71 Jordanian dinar).
Jordan is largely land-locked country in the Middle East. Jordan is less dependent on oil and gas exports than its neighbours and has struggled with sluggish economic growth and rising debt. The Jordanian dinar entered circulation in 1950 and is pegged to the US dollar.
5. British pound (GBP)
The British pound is the fifth strongest currency in the world with 1 British pound buying 1.28 US dollars (or US$1 equals 0.78 British pounds).
Britain is the sixth largest country by Gross Domestic Product (GDP), according to the World Bank. The pound was first introduced in the 1400s before being decimalised in 1971. It is free-floating and thus not pegged to other currencies.
5. (Tie) Gibraltar pound (GIP)
The Gibraltar pound is the joint fifth strongest currency in the world with 1 Gibraltar pound buying 1.28 US dollars (or US$1 equals 0.78 Gibraltar pounds).
Gibraltar is located at the southern tip of Spain and is officially a British territory. The Gibraltar pound was first introduced in the 1920s and is pegged to the British pound (at par, meaning that one GIP equals one GBP).
6. Cayman Islands dollar (KYD)
The Cayman Islands dollar is the sixth-strongest currency in the world with 1 Cayman Islands dollar buying 1.20 US dollars (or US$1 equals 0.83 Cayman Islands dollars).
The Cayman Islands is a British territory in the Caribbean and is an offshore financial centre. The Cayman Islands dollar was first introduced in the 1970s and is pegged to the US dollar.
7. Swiss franc (CHF)
The Swiss franc is the seventh strongest currency in the world with 1 Swiss franc buying 1.15 US dollars (or US$1 equals 0.87 Swiss francs).
The Swiss franc is the official legal tender of Switzerland and Liechtenstein and is seen as a safe haven due to Switzerland’s political stability. The Swiss franc was introduced in 1850 and was later briefly pegged to the Euro before moving to a free-float.
8. Euro (EUR)
The Euro is the eighth strongest currency in the world with 1 Euro buying 1.10 US dollars (or US$1 equals 0.91 euros).
The Euro is the official currency of the Eurozone, being 20 out of the 27 countries that form part of the European Union. The physical currency entered circulation in 2002 and is free-floating.
Related: Euro to AUD forecast
10. US dollar (USD)
The US dollar is the 10th strongest currency in the world, worth exactly 1 against itself. All other units of currency across the globe are worth less than a US dollar.
Created in the 1700s, the US dollar is legal tender in the USA, other US territories and sovereign nations including Ecuador and Zimbabwe.
The US is the world’s largest economy by GDP and the US dollar is by far the most-traded currency globally.
The US dollar is also the largest reserve currency in the world (the currency most held by central banks) and is the currency used to price many commodities, including oil, gold and copper.