‘It’s probably something like the Vietnamese dong,” sighed Michael Power, an Investec analyst, when I ask him which currency is the strongest in the world. “There are certain currencies we just wouldn’t pick up on.”
There are three different kinds of currencies: free-floating, managed, and fixed. For the most part free-floating currencies have been appreciating against the dollar, managed currencies have been reluctantly appreciating against the dollar and fixed currencies are not moving at all, Power said.
Currencies that are fixed against the dollar include those of Gulf states, which consequently have experienced inflationary pressures. Kuwait recently broke ranks with its neighbours, saying it would revalue its currency to combat inflation.
Power’s figures show that Venezuela is down about 22%, South Africa has dropped about 16% and Japan and Taiwan are down 5%, compared with the dollar. These are the only major moves by currencies around the world against the greenback in a 12-month period – although there are “tiny” downward moves in Pakistan, Hong Kong, Argentina, and Turkey.
Hungary and Columbia have both appreciated 12% against the dollar, Israel is up 10%, Sweden is up 9%, and the eurozone, Britain, Thailand, and Poland are all up 8%.
Part of the problem with rating the world’s strongest currency is that the goalposts are shifting constantly. Currency strength can be measured only by comparing one nation’s unit against another.
Strength is always relative, never absolute. And although a currency might be said to be strong or weak, what really matters is the consequence of that strength: its competitiveness in international trade, domestic inflation and buying power.
At the time of writing financial website financemaps.com showed that the strongest currency in the world was the Canadian dollar, up 0,43% against the US dollar in 24 hours. The Thai baht was rated the weakest, having lost 0,66% in the same period. But on a weekly basis the Hungarian forint was the strongest, gaining 1,89% on the greenback. Trinidad and Tobago dollars slipped the most, losing 1,19%.
The picture changes again when intramonth movements are considered. The Brazilian reais gained the most, 0,43% against the dollar, but the South African rand lost 2,58% in the same period.
But Power cautions that South Africans are still conditioned to think that a strong currency is a good one. In fact, a strong currency makes our prices more expensive relative to other countries and harms our chances as an exporting nation.