The problem with currencies is that the safest options usually don’t offer a big reward.At least withtop tier stocks you’re usually receiving a dividend. Nevertheless, let's take a look at the safest currencies in the world. There is actually one surprise currency that does have significant upside potential over the long haul.
Forward Looking Approach
Let’s remove day to day exchange rates from the equation and take a forward looking approach. The U.S. dollar is the biggest enigma to investors at the moment, but thereare logical reasonsfor its behavior: Interest rates are likely to increase later this year. With quantitative easing coming to a close, investors are piling back into the U.S. dollar. (For more, see: 3 Factors that Drive the U.S. Dollar.)
The European Central Bank (ECB) plans on purchasing $1.16 trillion in public and private sector bonds by 2016. This will primarily be done in the larger economies: Germany, France and Italy. Aside from Germany, the Eurozone is suffering from high unemployment, and it’s hopeful that injecting money into the economy will provide an assist. Either way, this won't help the euro against the U.S. dollar.
The Bank of Japan (BOJ) recently upped its annual purchases of government bonds to 80 trillion yen from 60-70 trillion yen. The Japanese are fighting hard against deflation. Unfortunately, they’re not realizing that you can’t stop deflation, especially when you have the oldest consumers in the world. Once again, this move will not help the Japanese yen against the U.S. dollar. (For more, see: Get to Know the Major Central Banks.)
Based on the points above, we can see that the U.S. dollar is likely to appreciate (for now), andthat the euro and Japanese yen would be high risk. In regards to the euro, the Swiss National Bank (SNB) recently abandoned its currency peg to the euro — a sign of no confidence.
As far as the U.S. dollar is concerned, it looks like a great bet at the moment, but U.S. dollars are Federal Reserve notes. Now consider that the Federal Reserve has $2.2 trillion in Treasury debt and $1.5 trillion in mortgage-backed securities. (For more, see: Trade a Surging U.S. Dollar with These 3 ETFs.)
The U.S. dollar is currently in bull mode, and that’s likely to last for a considerable amount of time. On the other hand, while the Federal Reserve is capable of bailing everyone out, eventually, who’s going to bailout the Federal Reserve? The answer to that question might irritate you, because the answer is likely going to be you the taxpayer. That said, the United States is very good at finding ways to win and there’s no telling what creative ideas those in power will come up with next. Hopefully, a creative solution will be found. But is that something you want to bet on? Probably not.
Norway And Singapore
The Norwegian krone has been known as a safe currency, thanks in large part to Norway having no net debt. The Norwegian krone is also a standalone currency which means it’s not tied to another country’s failures. The krone hasn’t been performing well as of late due to economic data not meeting expectations and falling home prices. The latter has slowed the consumer. However, with a disciplined and responsible system in place, it should remain a good long term bet. (For more, see: Countries that Still Have the Golden AAA Credit Rating.)
Then there’s the Singapore dollar, which has been attractive to investors because Singapore is now seen as the place to hide money for tax reasons. There might be opportunity here, but since this investment wouldn’t be based on something sustainable, consider avoiding.
Then there’s that other currency referred to above, which has yet to be covered.
According to Dictionary.com, the definition of currency is as follows: “Any form of money in actual use as a medium of exchange.” Therefore, gold applies. The best attributes for gold: can be bought and stored, easily converted to almost any currency, highly liquid, limited supply.
That last point is especially important because it separates gold from all the fiat currencies (not backed by a physical commodity) around the world. Many people want to go back to the gold standard, but others will argue that the gold standard didn’t work either. The truth is that no system is fool proof. While the gold standard had its short-term fluctuations (expected), it lasted for well over a century as well as periods of time prior to the 19th century. (For more, see: How Can I Invest in gold?)
The problem with investing in gold today is that the U.S. dollar is in favor, which usually trades inversely to gold. Even if the stock market and/or economy tanks, gold isn’t likely to hold up because all commodities come down in a deflationary environment. If you look at our small stint of deflation during the financial crisis, you will see that gold suffered prior to the Federal Reserve stepping in. That said, once deflation is realized and accepted, opposed to just a fear, the economy shouldbegin tobottom. It will take time (perhaps years), butthis should present a great opportunity to buy gold. When organic growth returns, inflationwill ramp up, which will make gold intriguing. In fact, gold could hit new highs.
The Bottom Line
A perfect currency doesn’t exist. If you want to invest in the U.S. dollar, then you’re timing better be excellent. If you want to invest in the Norwegian krone, it’s safe, but there isn’t much upside. The Singapore dollar? This could present rewards, but it’s not based on honest and sustainable policies. Gold is probably the best bet, but not at the moment. (For more, see: Popular Forex Currencies.)
Dan Moskowitz owns shares of Market Vectors Double Short Euro ETN (DRR).
What is the safest currency in the world? ›
The Swiss franc (CHF) is generally considered to be the safest currency in the world and many investors consider it to be a safe-haven asset. This is due to the neutrality of the Swiss nation, along with its strong monetary policies and low debt levels.Why is the US dollar so trusted throughout the world? ›
The dollar has been gaining strength against the currencies of other major economies. The dollar is strong because the US economy is healthier than those of many other countries and because the Federal Reserve keeps raising interest rates.Which country has the safest currency and why? ›
United States Dollar (USD)
Having the most stable currency is important because it allows you to invest securely and with confidence. The value of the U.S. dollar comes from its recognised stability and strength as well as its status as the world's reserve currency.
- 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). ...
- Bahraini dinar (BHD) ...
- Omani rial (OMR) ...
- Jordanian dinar (JOD) ...
- British pound (GBP) ...
- US dollar (USD)
Safe-haven currencies are currencies that tend to retain or increase in value during times of uncertainty and market instability. Safe havens tend not to have a correlation with the performance of stocks and bonds, making them ideal for trading in the event of market crashes.What country has the safest money? ›
Switzerland is a notorious worldwide standard for financial safe-havens. Switzerland and banking are almost synonymous with anyone around the world. This highly developed, multilingual European country has become the global standard for financial stability throughout several generations.
Energy access, barter ability, security, and food and water access are essential to preparing should the dollar become invaluable. Whatever debt you have now will follow you into a currency reset. No matter the world reserve currency, you'll still owe your mortgage, credit card, car, and college tuition.Why is US currency so strong? ›
The Steady USD
The U.S. dollar is considered the world over as the currency that offers the most with regard to stability. It is a strong currency. Used as a reserve currency for international finance and trade, sentiment and its widespread utility has made it solid and bankable.
The currency wars are getting hot and it's looking increasingly likely that the world is going to start moving away from the US dollar as a reserve currency – gold or bitcoin are the front runners to replace it.Why is the safest country in the world? ›
1. Iceland. Iceland, the land of fire and ice, is also the safest country in the world according to the Global Peace Index. With a low homicide rate, low level of violent crime, and limited access to small arms, Iceland is truly a peaceful country for its residents and visitors.
What is the strongest currency and why? ›
Known as the strongest currency in the world, the Kuwaiti dinar or KWD was introduced in 1960 and was initially equivalent to one pound sterling. Kuwait is a small country that is nestled between Iraq and Saudi Arabia, whose wealth has been driven largely by its large global exports of oil.What is the most important currency in the world and why? ›
USD – US-Dollar
The USD is still the world's most traded, most important currency.
The Kuwaiti dinar (KWD) is often the most valuable foreign currency and it does not rely on a peg. It floats freely. Substantial oil production has helped to augment Kuwait's wealth and support the value of the Kuwaiti dinar. Over the years, Kuwait amassed a significant sovereign wealth fund.Is the U.S. dollar the strongest? ›
Compared to many world currencies, the dollar is the strongest it's been in decades. That's affecting the global economy and how business gets done.What country is the U.S. dollar worth the most? ›
Tunisia. One U.S. dollar is worth roughly 2.96 Tunisian dinar (as of Mar. 8, 2022). The North African country boasts a Mediterranean coastline, access to the Sahara desert, and is across the sea from Italy and France.What keeps a currency stable? ›
According to New World Economics, a currency is stable when its value doesn't change significantly over time. Various factors contribute to stability, such as economic policies, inflation, interest rates, and even trust.Why is the US dollar considered a safe haven currency? ›
Often the U.S. dollar is a default safe haven for companies facing any domestic currency uncertainty due to the fact that it is the world's reserve currency and the denomination for many international business deals.What factors make a country's currency stable? ›
- Inflation Rates. Changes in market inflation cause changes in currency exchange rates. ...
- Interest Rates. ...
- Country's Current Account/Balance of Payments. ...
- Government Debt. ...
- Terms of Trade. ...
- Political Stability & Performance. ...
- Recession. ...
- Czech Republic.
- Costa Rica.
- JPMorgan Chase.
- U.S. Bank.
- PNC Bank.
- Wells Fargo.
- Capital One.
- M&T Bank Corporation.
Which country is best for saving money? ›
|Country||Average Annual Income||Average Household Savings|
A large number of factors influence currency value. Whether the U.S. dollar depreciates in relation to another currency depends on the monetary policies of both nations, trade balances, inflation rates, investor confidence, political stability, and reserve currency status.What happens when the U.S. dollar fails? ›
A weaker dollar buys less in foreign goods. This increases the price of imports, contributing to inflation. As the dollar weakens, investors in the benchmark 10-year Treasury and other bonds sell their dollar-denominated holdings.Why does the U.S. want a weak dollar? ›
A weaker dollar also makes U.S. goods and services (and assets) relatively less expensive for foreign buyers, which benefits U.S. producers that export goods.What are the benefits of a strong currency? ›
- Traveling Abroad Is Cheaper. ...
- Imports Are Cheaper. ...
- Multinationals That Do Business in the U.S. Benefit. ...
- Status as World Reserve Currency Is Bolstered. ...
- Tourism to the U.S. Is More Expensive. ...
- Exporters Suffer. ...
- US Companies Conducting Business Abroad Are Hurt.
Since the early 20th century, the decline in the value of a dollar has been dramatic due to inflation.What is US money backed by? ›
Federal Reserve Notes are backed by debt purchased by the Federal Reserve, and thus generate seigniorage for the Federal Reserve System, which serves as a lending intermediary between the Treasury and the public.What should I own if a dollar crashes? ›
- Gold And Silver Coins.
- Gold IRAs.
- Real Estate Investments.
- Foreign Bonds.
- Collectables Such as NFTs.
- Food Storages.
- Own Foreign Currency.
Safest Cities In America
- Glens Falls, New York. ...
- Midland, Michigan. ...
- State College, Pennsylvania. ...
- The Villages, Florida. ...
- 5. Logan, Utah. ...
- Wausau, Wisconsin. ...
- Cambridge, Massachusetts.
Is USA a safe country to live in? Although it's true that the US has a higher crime rate than many other developed countries, its reputation for violence is often exaggerated by the local media. As a whole, the country is an extremely safe expat destination.
Which country is safety No 1? ›
Why is Singapore the safest country to travel to? As per the report, Singapore is the least deadly or safest destination in the world.What does a strong currency mean for the economy? ›
A strengthening U.S. dollar means that it now buys more of the other currency than it did before. A weakening U.S. dollar is the opposite—the U.S. dollar has fallen in value compared to the other currency—resulting in additional U.S dollars being exchanged for the stronger currency.Does strong currency mean strong economy? ›
While some might prefer a strong currency, a weak currency can result in more economic benefits. The value of the domestic currency in the foreign exchange market is a key consideration for central banks when they set monetary policy.What is main purpose of currency? ›
Money in the form of currency serves three main purposes: as a medium of exchange, as a unit by which to measure economic value, and as a means by which to store wealth.What dollar is the rarest? ›
1. The 1794 Flowing Hair Silver Dollar. The 1794 Flowing Hair Silver Dollar may sit atop the rankings of the most expensive coin ever sold, at least for now. Some experts believe that it was the first silver dollar struck by the U.S. Mint.How long will the dollar stay strong? ›
In our view, the dollar's surge in 2022 is largely due to the rapid pace of Federal Reserve rate hikes. With the pace of Fed tightening likely to slow, the dollar has room to retreat further in early 2023 should central bank policies become more aligned.What currency is the weakest against the U.S. dollar? ›
The Iranian Rial currently ranks as the lowest currency in the world in terms of its exchange rate with the US dollar. For easier calculations, Iranians often use the term “toman”, which is equal to 10 rials.Is dollar getting stronger 2023? ›
BENGALURU, Dec 7 (Reuters) - The dollar will rebound against most currencies over the coming months, with the growing threat of recession in the U.S. and elsewhere keeping it firm in 2023 through safe-haven flows, according to market strategists polled by Reuters.Where is the U.S. dollar strong? ›
From the sunny beaches in Mexico to European gems like Poland and hotspots in South America and Asia, you're spoiled for choice with places that are wallet-friendly. If you're looking for a real travel bargain, consider one of these destinations where your dollar will really go a long way.What year was the U.S. dollar the strongest? ›
Historically, the United States Dollar reached an all time high of 164.72 in February of 1985. United States Dollar - data, forecasts, historical chart - was last updated on March of 2023.
What is America worth in dollars? ›
United States - Federal Government; Net Worth (IMA), Level was -20997153.00000 Mil. of $ in July of 2022, according to the United States Federal Reserve.How many countries rely on the U.S. dollar? ›
The American dollar was introduced as the official currency of the United States in 1785 and is used as official currency in 17 countries. In addition, there are numerous countries where the U.S. dollar is readily accepted even in regular retail transactions.What countries does the U.S. dollar go the farthest? ›
- United Kingdom.
- South Africa.
The U.S. Dollar Is Still Considered Safe-Haven Currency
The greenback's reliability has made it the dominant global reserve currency since World War II, meaning it is most used by central banks around the world for international trade and financial transactions.
The Kuwaiti Dinar
With 1 KWD (Kuwaiti dinar) = 3.26 USD, the Kuwaiti dinar has outshone every other world currency. This is more or less the world's most valuable currency, and it has never relied on a peg.
Safe haven currencies are currencies that are expected to retain or increase in value when it seems like the world is coming to an end (geopolitical stress). The U.S. dollar (USD), along with the Japanese yen (JPY) and Swiss franc (CHF) are considered safe-haven currencies.Is the U.S. dollar a stable currency? ›
Stability is one of the major factors that explains why a number of countries have adopted the U.S. dollar as official currency. The U.S. dollar has only been deliberately devalued once—as part of the Roosevelt administration's gold policy—and its notes have never been invalidated.Is destroying US dollars a crime? ›
It is not illegal to write on paper money, but it is illegal to degrade money. 18 USC 333 was written to prohibit the malicious destruction of currency, and 18 USC 475 was written to prevent the currency from becoming a vehicle for commercial advertising, as for Burger King.What will replace the dollar? ›
The currency wars are getting hot and it's looking increasingly likely that the world is going to start moving away from the US dollar as a reserve currency – gold or bitcoin are the front runners to replace it.What happens if the U.S. dollar falls? ›
A falling dollar could bring new risks for inflation, including rising commodity prices. The greenback was golden for much of 2022, with the U.S. dollar riding its strongest wave higher in two decades on the back of rising interest rates.