A global currency is one that is accepted for trade throughout the world. The most popular are the U.S. dollar, the euro, and the yen. Another name for a global currency is the reserve currency.
According to the International Monetary Fund, the U.S. dollar is the most popular because as of the fourth quarter of 2019, it makes up over 60% of all known central bank foreign exchange reserves. That makes it the de facto global currency, even though it doesn’t hold an official title.
Why the Dollar Is the Global Currency
The 1944 Bretton Woods agreement kickstarted the dollar into its current position. Before then, most countries were on the gold standard. Their governments promised to redeem their currencies for their value in gold upon demand. The world’s developed countries met at Bretton Woods, New Hampshire, to peg the exchange rate for all currencies to the U.S. dollar. At that time, the United States held the largest gold reserves. This agreement allowed other countries to back their currencies with dollars rather than gold.
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By the early 1970s, countries began demanding gold for the dollars they held. They needed to combat inflation. Rather than allow Fort Knox to be depleted of all its reserves, President Nixon separated the dollar from gold.
In addition, here is the list of the top 5 most valuable currency in the world;
#5 – British Pound Sterling ($1.23)
Most people consider that British Pound is the strongest world currency, but it only closes the top five of this list.
British Colonies issue their own banknotes, which visually differ from banknotes issued by the Bank of England, but they are valued as 1 per 1.
Therefore, there are several of them: Scottish, North Ireland, Manx, Jersey, Guernsey, Gibraltar Pounds, as well as St. Elena Island Pound and Falkland Islands Pound.
Amusingly, native Britons do not always want to accept “other” Pounds as a means of payment.
#4 – Jordan Dinar ($1.41)
It is hard to explain the high value of Jordan Dinar. This country is not economically developed, and it lacks essential resources, such as oil.
Nevertheless, one Jordan Dinar costs 1.41 US Dollars, which makes it one of 10 the strongest world currencies.
#3 – Oman Rial ($2.60)
Oman is a country on the Arabian Peninsula. Thanks to its strategic location, it possesses a developed economy and a high quality of life.
The Oman Rial is also pegged to US Dollar as Bahrain Dinar.
Remarkably, the purchasing power of this currency is so high that the government had to issue 1/4 and 1/2 Rial banknotes.
#2 – Bahrain Dinar ($2.66)
Bahrain is a Persian Gulf island state with a population of just over 1 million people. As in the first case, this country’s largest source of income is the “black gold” exports.
Interestingly, the Bahrain Dinar is pegged to the US Dollar exchange rate, and its rate against the US Dollar has remained stable since 2005.
#1 – Kuwaiti Dinar ($3.24)
The high value (rate) of its currency is explained by significant oil exports into the global market.
Kuwait is a small country with enormous wealth. Due to the stable petroleum-based economy, highly developed oil production and export, Kuwait is considered to be one of the richest countries in the world.
Besides the very stable economy, Kuwait is a tax-free country with a very low unemployment rate.