Faced with the fall of the euro, should we go out and buy that currency?
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(CNN Spanish) ––
Given the strong inflation that only seems to be on the rise throughout the world, the different currencies begin to suffer the blows and reflect the uncertainty of an economy with two years of a pandemic in tow, a Russian war in Ukraine which has impacted oil prices and the slowdown in the growth of countries as key as China.
That is why it is worth asking, what are the 10 strongest currencies in the world?
(And before you get to the first place, we tell you in advance that it is not the dollar. Although this is the currency that is most used for international operations).
Why the strengthening of the dollar king is not to celebrate
A strong currency is determined by the amount of goods and services you can buy with it and the amount of other currencies you can receive in exchange for one unit of the initial currency, according to an analysis by Forex.com, a market trading platform. Forex.
As the dollar is the most used currency in the market, it works as a reference point to calculate the value of other currencies.
Thus, the more dollars you need to buy 1 single unit of another currency, the stronger it will be.
If you require fewer dollars, then it is considered weaker.
In fact, the dollar and the euro reached parity for the first time in 20 years on July 12, after the former strengthened against the latter, which registered a drop of 12% compared to last year.
The euro and the dollar reach parity for the first time in 20 years
The 10 strongest currencies in the world
Kuwaiti dinar
Bahraini Dinar
omani rial
jordanian dinar
Pound sterling
Cayman Islands dollar
Euro
Swiss franc
Dollar
Canadian dollar
Look at its exchange rate against the dollar in this table:
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Why is the Kuwaiti dinar so strong?
If you are not related to the foreign exchange market, you have probably never heard of the Kuwaiti dinar before.
And don't worry: it's because it's not as widely available as the dollar and euro.
The Central Bank of Kuwait explains that since 2007, its dinar was pegged to an "undisclosed basket of international currencies of Kuwait's major trading and financial partners."
The reason?
According to the bank, the exchange rate policy seeks to "maintain and enhance the relative stability" of the Kuwaiti dinar against other currencies. "Also protect the domestic economy against the impacts of imported inflation."
This derives from the fact that between 2003 and 2007 the currency was pegged to the dollar.
But Kuwait changed the policy"
Now, how does a country as small in size as Kuwait manage to hoard the strongest currency?
The answer lies in oil.
The CIA Fact Book explains that the country's economy is very rich because of the amount of crude oil reserves it has: approximately 102 billion barrels, or 6% of world reserves.
According to CIA data, oil accounts for 92% of Kuwait's export earnings and 90% of government revenues.
"Virtually all of Kuwait's wealth is derived directly or indirectly, through foreign investment, from oil extraction and processing," explains the Encyclopedia Britannica on the country's economy.
And he points out that the key element in the nation's development has been the constant and rapid expansion of its oil industry since 1970. The profits that Kuwait achieved in the following years on account of oil and investments gave it one of the highest per capita incomes high in the world.
In 1990, the country almost exhausted the income from foreign investments due to the invasion it suffered from Iran under the command of Saddam Hussein.
But to recover from the rebound in oil prices for the 2000s. With oil being the great center of the Kuwaiti economy, other sectors such as agriculture,
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