Many people think of the strongest currencies in the world and the U.S. dollar is the most popular currency that pops into one’s mind. Well, it should too as it is one of the most exchanged currencies in the world. But to all’s surprise, the U.S. dollar isn’t the strongest currency; instead it is the Kuwaiti Dinar (KWD).
But, can you imagine a country where your INR 2,000 can make you a millionaire or INR 500 can be worth somewhere in lakh? Or about countries where vacationing won’t be a money matter.
How are Overseas Currencies Priced?
Foreign or overseas currency is always traded in pairs. For instance, buying Indian rupees with Vietnamese dong or Indian rupees with Iraqi dinar. As a result, currencies are always priced relatively to another currency which is known as the exchange rate.
There are floating currencies, which means some values of the currencies vary depending on their demand and supply and some currencies are pegged which means that their value is stable at an agreed rate.
The exchange rate affects the pricing of goods and services in a foreign currency. For instance, if the Indonesian rupiah weakens against the rupee, a holiday in India would cost more in rupiah terms.
What Are The Top 10 Cheapest Currencies In The World As Of September 2023?
1. Iranian Rial (IRR) 1 INR = 516 IRR
The Iranian rial tops the list of the cheapest currencies in the world. The fall in the value of the currency can be explained by various factors. To begin with, the termination of the Islamic Revolution in 1979 was followed by foreign investors’ withdrawal from the country. The nuclear program and the Iran-Iraq war also played a huge part in causing financial distress along with other political unrest in Iran.
2. Vietnamese Dong (VND) 1 INR = 284 VND
The country has long followed a centralized economy. Although the country embarked on a path of forming a market economy, it still has a long road to walk. The currency is highly devalued currently but the chances are high of the currency improving considering the improvement in the economy.
3. Sierra Leonean Leone (SLL) 1 INR = 278 SLL
Sierra Leonean Leone is an African currency that is highly affected by poverty. Africa has had a history of financial scandals, corruption and conflicts including a heinous civil war in the western African region. All these led to a downfall of the country’s economy and the value of its currency. The Ebola infection added to Sierra Leonean’s woes, and is a constant factor that affects the country’s population that further consumes financial aid.
4. Lao or Laotian Kip (LAK) 1 INR = 212 LAK
The Lao or Laotian Kip is not a devalued currency but a currency that has had a low rate since the time of its introduction in 1952. Over the years the value of the currency has improved. Also, a railway is planned that will connect Beijing to Laos, which might draw investors to this small country. Although it is the cheapest currency, it is a promising one towards improving its value.
5. Indonesian Rupiah (IDR) 1 INR = 179 IDR
In the last seven years, the currency has not improved even the slightest. The factors that have brought devaluation of the currency include its decreasing foreign exchange reserves. Given Indonesia is heavily dependent on the export market, the fall of the cost of the commodities has further devalued its currency value.
6. Uzbekistani Som (UZS) 1 INR = 139 UZS
The government of Uzbekistan has employed many means to improve the economy of the country. But none of them have proved to be successful. The most recent one is the reformatory measure, so the changes that these measures will bring are yet to be explored in terms of currency value.
The Covid-19 pandemic hurt the economy deeply too. While data suggests that Uzbekistan has resumed internal economic operations starting the third quarter of 2022, the decline in its industrial output has increased the unpredictability in the currency’s future.
7. Guinean Franc (GNF) 1 INR = 105 GNF
Guinea as a country faces corruption and political instability that leads to a weakened currency. The country’s currency value is getting devalued by the passing years.
8. Paraguayan Guarani (PYG) 1 INR = 87 PYG
Paraguay is undergoing a terrible economic downturn as a result of high inflation, a high unemployment rate, increase in poverty and corruption. These factors have left a negative impact on the value of the currency.
9. Ugandan Shilling (USH) 1 INR = 45 UGX
Uganda faced several setbacks under Idi Amin’s governance. The country’s policies including immigration policies have impacted the country’s economy negatively. The impacts still affect the development of the country. However, the last few years witnessed improvement in its value but not more than 5% of the total devaluation.
10. Iraqi Dinar (IQD) 1 INR = 17 IQD
Iraq’s currency, the Iraqi dinar, is issued by the country’s central bank and is subdivided into 1,000 fils. Since the year 1990, inflation made the fils devoid of much value. In the past decade, the country also faced political instability.
Factors That Can Affect The Exchange Rates Of Weakest Currencies
The foreign exchange rate is an essential thing to determine a country’s economic health. The value of the currency depends on it. Let us see the important factors that impact the value of the currencies.
Market inflation may impact currency exchange rates. The price of goods and services will gradually rise steadily when inflation is low. When the inflation rate declines steadily, the currency value increases and vice versa.
Recession affects the country’s economic growth then the foreign exchange market makes no exception to it. During the recession, the interest rates will fall. Foreign capital would be devalued as a result of this. The value of the currency drops when foreign capital is scant and the interest rates are low.
The higher the interest rate means the value of the currency will go down. It is again an important factor that can affect the exchange rate.
Government debt or public debt is government-owned debt and is a public liability. If one country is facing debt, the chances of having more money are slight with the potential of causing inflation. The foreign investors would be in two minds about investing considering the high inflation which in return would depreciate the value of the currency.
The lack of stability in the government will harm the country’s economic performance as a result the investors will not profit from it. A stable administration attracts many foreign investors. The domestic currency value might be increased by the investment in addition to boosting foreign capital.