Currencies Analysis of Strong and Weak Currencies
The exchange rates of currencies are of great significance to investors, nations, traders, and forex traders. The rates reflect the economic stability of nations, their outputs, trade balances, price levels, and prospects of profitability in investment. Therefore, being able to forecast the trend of a certain currency’s exchange rate is of considerable economic value, and the only way to do it is by first understanding the multiple factors that affect the exchange rate of a currency and their level of influence. A currency’s power to buy is a reflection of its value in the international market. If you are an investor, importer, exporter, or foreign exchange trader, perhaps your focus is mainly on the strongest currencies. But there is a need to also evaluate the weakest of currencies and know which ones to avoid. Forget the Euro, US dollar, and the Sterling Pound, here is a list of some of the strongest currencies that most people perhaps overlook as well as some of the weakest as per a December 2016 update.
The Omani Riyal
The Omani Riyal (OMR) is the Sultanate of Oman currency officially designated as such since 1970. One Omani Riyal is equal to 2.6 United States dollars. The state of Oman is a traditional monarchy, which has taken significant steps in modernizing most spheres of its economy. Oman is one of the greatest importers of petroleum products and the nation has many oil reserves that have made it rich. Apart from having rich oil reserves, the nation has also made big developments in fisheries and agricultural sectors with the production of limes, wheat, bananas, coconuts, and poultry. There are also prospects of further modernization in various sectors, which make the nation and its currency more promising in terms of appreciation. The vibrant economy and promising prospects make the Omani Riyal one of the most promising currencies in trading.
The Kuwaiti Dinar
The Kuwaiti Dinar (KWD) is the official currency of the state of Kuwait. One Kuwaiti Dinar has a value equivalent to 3.28 USD. This small nation in the Arabian Peninsula also has large oil reserves. In fact, Kuwait has the 5th largest oil reserves in the world, and the country has gotten much of its wealth from the export of gas and oil. Prospective traders and investors should eye the Kuwaiti Dinar as one of the stable and valuable currencies in the global markets.
The Bahraini Dinar
The Bahraini dinar (BHD) is the second strongest currency in the top-ten global list in the modern world. The BHD is the official currency of Bahrain, and one Bahraini dinar is equivalent to 2.65 United States’ dollars. Bahraini was among the first Middle Eastern countries to discover its oil reserves, which it exploits for export and also trades on the reserves. Like Kuwait and Oman, Bahrain’s economic stability and bright future prospects are based on its petroleum reserves, and its currency can be a stable and good bargain in trade and investment.
The Swiss Franc
The Swiss Franc (CHF) is the official currency of Switzerland or the Swiss Confederation. The CHF is also among the strongest global currencies. One Swiss Franc is equivalent to 0.99 USD. The strong global banking sector of Switzerland, a stable political environment, and well-developed economy and infrastructure as well as tourism, are some of the major boosters of the nation’s economy and stability. As such, traders and investors can never go wrong with such a stable currency. However, the CHF depreciated by 2.94% in the last quarter of 2016.
Cayman Islands Dollar
The Cayman Islands’ dollar (KYD) is the among the top-ten strongest currency at number eight. One KYD is equivalent to 1.22 USD. Like Switzerland, the Cayman Islands are a popular banking and investment destination, which has attracted lots of global richest personalities to create trusts and seek financial services from the island. The Islands developed economy supports the stability of the currency and this makes it a dear trading tool.
This analysis cannot be complete without a brief look at four of the weakest currencies that traders and investors would perhaps shy away from as well as their respective nations because of great currency volatility and low currency value.
The Iranian Riyal
Iran has the second weakest currency in the world after Zimbabwe when valued against the US dollar. The Iranian Riyal (IRR) has a 100000 note as its highest denomination, which is equivalent to 3.12 US dollars. One USD is thus equivalent to 32090 Riyals. The weak currency and economy are a result of the economic sanctions imposed on the nation due to nuclear-based political problems. The sanctions have been the major cause of the downfall of the Iranian economy even though the nation has rich oil reserves such as Oman, Kuwait, and Bahrain. The economic problems have been compounded by the fact that Iran’s banking system is totally cut off from the rest of the global system of banking. Therefore, Iran is unable to sell its oil and when it sells it is in no position to demand, for a fair pricing rate. As such, this is one of the currencies to avoid.
Sierra Leonean Leone
The Leone, which is Sierra Leone’s official currency, is the 9th weakest global currency. One USD is equivalent to 5850 Leones. Sierra Leone was embroiled in a civil war that lasted for years, and the long war was one of the major causes of the nation’s economic downfall. The nation is rich in minerals and it is one of the major exporters of diamonds. But the foreign exchange received in return for the export of its diamonds is hardly enough to repair its economy. The future is bleak, and Sierra Leone is far from recovery. As such, the currency offers no bright prospects in making a trade.
The Guarani is the official currency of Paraguay - a South American state. This currency is the 8th weakest currency in the world. One USD is equivalent to 5572 Guarani. The nation’s large black market, inflation, and corrupt economic deals, which are uncontrollable, are the major contributors to Paraguay’s economic downfall. The nation also has had a long period of negative trade balance, which does not favor its economic growth and exchange rate. The nation’s currency is commodity-based, and it is expected to stabilize, but remain at a low value because its export markets are mainly in South America, and they are stable. Also, Paraguay has little dependency on large economies such as China, which are begging to stagnate in growth.
The Guinean Franc is among the top-ten weakest currencies in the world and it ranked six. One USD is equivalent to 9220 Francs. Guinea is a country with rich natural mineral reserves, and it can be a great investment target. But the nation is plagued with corruption and political instability, which makes investment difficult and challenging while leading to the loss of national income. There is little hope of the Franc becoming a valued trading currency, but this may last as long as corruption and political instability last.
With this comprehensive list of the strongest and weakest currencies, investors, importers, exporters, and traders of foreign currency can now know which currencies to keep an eye on and which ones to avoid like the plague.