Top 12 Strongest Currencies In The World 2024
The foreign exchange market is the largest and most liquid market in the world with over $6 trillion traded daily. With such a huge market, some currencies hold more value and importance than others.
The strength of a currency depends on factors like the underlying economy, monetary policy, political stability, demand and more. As we move into 2024, here’s a look at what may be the top 12 strongest currencies in the world.
Currency strength is vital for any economy as it determines how much imports cost, the state of inflation, and even represents the country’s economic and political stability to the world. Some major factors that contribute to a currency’s strength include the country’s inflation rates, interest rates, economic growth, debt levels, trade surplus/deficit, and more.
A stronger currency makes imports cheaper, keeps inflation low, attracts foreign investment, and reduces the burden of national debt. On the flip side, an excessively strong currency can hurt export competitiveness and economic growth. Thus, central banks and governments aim to maintain an optimal level where the currency is not too weak or too strong.
As the world economy evolves in 2024, here are 12 currencies expected to be among the strongest based on their underlying fundamentals and positions heading into the new year.
1. United States Dollar (USD)
The United States dollar (USD) is the world’s most widely held reserve currency, accounting for nearly 60% of global foreign exchange reserves. Key reasons for USD’s dominant position include the immense size of the US economy, its stability, and the dollar’s role as the world’s primary petroleum currency.
In 2024, the greenback is likely to remain highly strong despite concerns over inflation and the US national debt crossing $31 trillion. America’s monetary policy still leads globally, with the US Federal Reserve hiking interest rates to curb inflation. Moreover, in times of geopolitical tensions, the USD is still viewed as a safe haven. With the US expected to weather inflationary pressures and avoid a recession, the dollar index should stay elevated above 100.
2. Euro (EUR)
The euro (EUR) is the shared currency of 19 of the 27 European Union members, making it the second most traded and held reserve currency globally. Although the Eurozone faces economic challenges like high energy costs and inflation, the euro has steadily gained ground on the USD in 2022.
In 2024, the EUR is poised to remain strong, boosted by the hawkish European Central Bank raising interest rates and ending quantitative easing. The EU’s unity in the face of the Ukraine crisis and its steps towards strategic autonomy should also help. With the Eurozone’s economy expected to show resilience and growth picking up gradually, the EUR should hold up well vs. rivals like the yen and sterling.
3. Japanese Yen (JPY)
The Japanese yen (JPY) has long enjoyed safe haven appeal due to Japan’s sizable current account surplus, high foreign reserves, and position as the world’s third-largest economy. But 2022 saw the yen depreciate sharply to 24-year lows against the USD due to the Bank of Japan’s ultra-dovish monetary policy.
However, the BoJ is likely to end its yield curve control policy in 2023, allowing rates to normalize. This should provide major support for the yen to strengthen again. Moreover, Japan’s fundamentals remain strong, with low inflation, high productivity, an aging society stockpiling savings and global trust in the yen. After a difficult 2022, expect the JPY to regain its footing in 2024.
4. Swiss Franc (CHF)
Known for its stability and sound fundamentals, the Swiss franc (CHF) has long served as a safe haven during times of market volatility and uncertainty. Switzerland runs regular current account surpluses, has a well-capitalized banking system, and maintains excellent international investor confidence.
Despite attempts by the Swiss National Bank (SNB) to keep the franc from appreciating, it remains highly strong and this is expected to continue in 2024. Switzerland’s neutral political status, capitalist economy, low debt levels, and proactive monetary policy provide a bulwark against global crises. With currencies like the EUR and JPY facing challenges, the CHF should stay highly coveted.
5. Canadian Dollar (CAD)
The Canadian dollar (CAD) derives strength from Canada’s resource-rich economy, prudent fiscal policies, and its close ties to the US economy. In 2022, the CAD reached its strongest level against the USD since 2018 supported by the Bank of Canada (BoC) hiking rates to tame inflation.
In 2024, the loonie looks set to stay on solid ground as the BoC maintains its aggressive policy to keep inflation in check. Canada’s vast commodity resources, stable banking system, expanding services sector, and steady population growth bode well long-term too. With the country ratifying the USMCA deal, the CAD should retain a strong correlation with the USD.
6. Australian Dollar (AUD)
The Australian dollar (AUD) is often influenced by commodity prices, risk sentiment, interest rate differentials, and China’s economic outlook. After a difficult 2021, the Aussie dollar recovered strongly in 2022 as the Reserve Bank of Australia (RBA) raised rates to curb rising prices.
In 2024, the AUD is expected to fare reasonably well backed by Australia’s strong terms of trade, focus on expanding LNG output, and hawkish RBA policy. Thriving mining and services sectors also help offset risks like high household debt, droughts, and housing unaffordability. With China gradually reopening, the Aussie looks set for a decent 2024 as well.
7. Singapore Dollar (SGD)
The Singapore dollar (SGD) is regarded as one of Asia’s strongest and most stable currencies, underpinned by robust finances, large reserves, and a thriving economy. While the SGD is influenced by global risk sentiment, it has held up well thanks to Singapore’s exceptional economic credentials, rising interest rates, and low inflation.
As a financial hub, Singapore is less susceptible to commodity or supply chain issues. The Monetary Authority of Singapore also maintains a modest and gradual approach to tightening policy. Backed by a triple-A sovereign rating, high household savings, current account surpluses and disciplined fiscal policies, the SGD should continue shining in 2024.
8. British Pound (GBP)
The British pound (GBP) is a major global currency that weighs on investor risk appetite and is heavily impacted by the UK’s economic and political developments. Despite solid rate hikes by the Bank of England, the GBP struggled in 2022 on recession risks and political uncertainty.
However, sterling could regain composure in 2024 as policymakers get inflation under control. The UK’s strong institutions, developed capital markets, attractive business environment and recovery from the pandemic may also aid the GBP. Geopolitical issues around Brexit and Scotland loom but the pound’s inherent heft should limit excessive weakness.
9. Chinese Yuan (CNY)
The Chinese yuan (CNY) has solidified itself as a major global currency after years of internationalization efforts by the PBOC. China’s vast economic size, ample foreign reserves, and structural current account surplus provide a strong platform for the yuan. However, strict capital controls and occasional PBOC intervention curb the yuan’s strength.
After weakening in 2022 amid China’s zero-COVID policy, the yuan could see modest gains in 2024 as economic activity picks up following the reopening. The PBOC’s prudent policies should deter major depreciation while yuan internationalization continues. With China’s economy projected to recover ground, expect the yuan to hold up reasonably well.
10. Saudi Arabian Riyal (SAR)
The Saudi Arabian Riyal (SAR) has been pegged to the US dollar at a fixed exchange rate since 1986, bringing relative stability to the currency. As the world’s largest oil exporter, Saudi balances of payment remain solid despite lower crude prices. Its ample fiscal buffers, prudent spending and diversification efforts also support the riyal.
With Saudi Arabia’s economy projected to see moderate growth in 2024, backed by higher energy prices and rising non-oil sectors, the riyal should remain firmly pegged to the dollar. Planned fiscal reforms, moves to open up to foreign investors and active diversification plans will also lend support to the SAR in 2024.
11. Norwegian Krone (NOK)
The Norwegian Krone derives tremendous support from Norway’s vast oil and gas reserves, which drive large trade surpluses. While high energy prices and rate hikes support the NOK, Norway’s inflation and housing market risks warrant caution. Still, the NOK should stay relatively resilient.
Norway’s vast sovereign wealth fund, peg to the strong euro, low unemployment and careful economic management suggest the krone will retain haven appeal. The NOK may weaken slightly if oil prices drop but Norway’s solid fundamentals should provide an anchor against pronounced depreciation pressures.
12. Indian Rupee (INR)
Among emerging market currencies, the Indian rupee (INR) holds promise given India’s strong economic growth trajectory, prudent foreign reserve stockpiling and structural reforms. However, high inflation and trade deficits remain near-term drags.
Looking ahead, the INR could gain against peers as India outpaces global growth on robust domestic demand. Flows may improve as India attracts investor interest with pro-business policies. However, commodity prices, US Fed hikes and slowing global growth may limit sharp gains. Overall, expect the INR to hold ground reasonably well vs. EM rivals.
Conclusion
Currency strength evolves dynamically as macro conditions and investor risk appetite fluctuate. But currencies backed by fundamentals like strong economic growth, restrained inflation, fiscal prudence, policy stability and liquid capital markets tend to outperform over time.
Headed into 2024, currencies like the USD, EUR and CHF appear poised to uphold their strength given their central banks’ tightening policies to curb inflation and their underlying financial might. Meanwhile, currencies like the JPY, GBP and AUD could rebound as their economies find firmer ground. Currencies like the CAD, SGD and NOK should also stay resilient, while the INR offers appeal among EM units.
Nonetheless, as global risks and uncertainties persist, currency volatility may remain elevated. Central banks around the world will need to strike a delicate balance between tightening policy and avoiding recession. This could lead to shifting dynamics determining currency strength going forward. Overall though, countries with strong macroeconomic, trade and debt metrics should see their currencies uphold purchasing power better.