Reason for Kuwait currency the strongest

It’s not really the strongest, it is simply the currency with the highest nominal value because of its historic connections to the British pound (which was once the currency with the highest nominal value). When the Kuwaiti dinar was introduced in 1960 its value was equivalent to 1 Indian rupee (the currency used in Kuwait prior to 1960) which was equivalent to 1 British pound at that time, and which was pegged to the US dollar at 1 pound to 2.80 dollars.

Kuwait currency the strongest why?

he value of the US dollar declined and the Central Bank of Kuwait was forced to increase the value of the dinar. It got up to 3.40 dollars before they finally abandoned the peg to the US dollar in 1975 and instead pegged the dinar

Main Reason for Kuwait currency the strongest

As the Kuwaiti dinar was never a free-floating currency, its value has always been managed by the Central Bank of Kuwait so as to maintain its value relative to either the US dollar or the currency basket. Many countries, even countries much poorer than Kuwait, maintain such currency pegs. While access to oil certainly helped Kuwait (e.g. Kuwait never needed to devalue the dinar in order to boost exports), the main reason the Kuwaiti dinar has such a high value today is because it started out with a high value relative to the US dollar and enacted monetary policies so as to maintain that relative value.

A floating point currency is one where the value of the currency is determined by its supply and demand.

For example, in order for the government of Azerbaijan to buy a product manufactured in Turkey, the government needs to pay in Turkish Lira. This increases the demand of the Turkish lira, and also increases its value. In floating point systems, if a country exports more than it imports – its value increases.

Basically to understand how a currency is valued depends upon the import and export of goods/services for a country and kuwait being oil rich, the amount of oil it exports is way too high to the quantity of goods it imports. Hence the currency value goes up with the higher purchasing power.

Kuwait has about 6 pc world’s oil reserves . The country has a surplus budget all along which is about 30 pc of country’s gdp ranked no 1 in this in the world

 

1 Kuwaiti Dinar =US$3.29 = £2.04 = €3.08

 

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