Published: 26 Feb at 11 AM by Elaine Housten and tagged under category Currency Exchange
As part of our top-10 series, we’d be remiss if we didn’t include the top 10 most expensive currencies against the Pound Sterling of 2019 (so far). Market participants focusing on the majors often mistake the Pound Sterling for the world’s single strongest currency but, as you’ll soon see, this isn’t the case with the GBP ranking around fourth globally.
From the oil-rich to the largest reserve currency in the world, the following list includes a mix of both the unsurprising developed market economies alongside several currencies which might never have been on your radar.
*All exchange rates are correct at the time of writing (1235 GMT, 25th Feb 2019)
1.Kuwaiti Dinar (KWD)
Kuwaiti Dinar to Pound Sterling (KWD/GBP) exchange rate = £2.50
A potential surprise tops the list as the most expensive currencies in the world in terms of GBP value. At £2.50 per Kuwaiti Dinar, the KWD is the world’s most valuable currency in exchange terms.
Despite being geographically small, the tiny middle-eastern nation has huge wealth in terms of oil reserves (which account for upwards of 6% of the totally global supply) and a relatively open economy allowing for frictionless international trade and exports.
According to the latest data, petroleum revenue contributed over 50% of gross domestic product (GDP) growth last year, accounting for 92% of the nation’s exports and 90% of the government’s income.
While exceedingly wealthy, the Kuwaiti economy’s reliance on oil exports represents a distinct lack of diversification and despite the Kuwaiti government’s intention to splurge upwards of $104B to diversify the economy and attract more foreign direct investment (FDI), political uncertainty and delays have mean these changes are yet to materialise.
2. Bahraini Dinar (BHD)
Bahraini Dinar to Pound Sterling (BHD/GBP) exchange rate = £2.229
Similar to Kuwait, the Bahrain economy is decisively oil-centric with oil revenue accounting for around 86% of Bahraini budget revenues in 2018.
Lower oil prices have weighed on the Bahraini economy and in turn the Bahraini Dinar (BHD), prompting a 2016 budget deficit of around $4B, roughly 14% of the nation’s GDP. Given Bahrain’s meagre foreign assets and limited borrowing ability, 2018 saw three major US credit agencies downgrade Bahrain’s sovereign debt rating to “junk”.
In a bid to diversify, Bahrain faces significant regional challenges with regards to competitiveness in the industry, finance and tourism sectors. The nation does however benefit from a free-trade agreement (FTA) with the United States.
3. Omani Rial (OMR)
Omani Rial to pound Sterling (OMR/GBP) exchange rate = £1.9825
Continuing the theme of oil-rich nations, Oman comes in at third on the list with a current Rial-to-Pound x-rate of £1.9825 to 1 OMR.
With oil accounting for approximately 84% of overall Omani government revenue, the middle-eastern nation has implemented sweeping measures to diversify their economic profile amid dwindling oil levels.
The Omani government plans to implement enhanced oil recovery techniques to maximise oil production while focussing on diversification (especially gas-based industries and tourism), industrialisation and privatisation with a view to reducing the oil-sectors contribution to GDP from the current 46% to 9% by 2020.
4. Euro (EUR/€)
Euro to Pound Sterling (EUR/GBP) exchange rate = £0.8684
Were this a list of the most valuable currencies against say, the US Dollar (USD/$), the fourth spot would go to the Pound Sterling (GBP/£).
Coming in a fourth on the list of the most expensive currencies against the Sterling, with a rate of €1 to £0.8684, is the Euro (EUR/€).
With a single-market framework serving the 28 EU member states, the European Union comprises of a mixed bag with per capita income between member states ranging from $13,000 to $82,000.
The EU economy has never fully regained traction in the wake of the 2008/09 global economic crisis and the ensuing sovereign debt crisis. However recent years (2014-2017), saw the bloc post moderate GDP growth overall.
According to Index Mundi “the EU’s recovery has been buoyed by lower commodities prices and accommodative monetary policy, which has lowered interest rates and the euro’s foreign exchange value. However, significant drags on growth remain, including persistently high unemployment in some member states, high levels of public and private debt loads, lackluster investment, and an aging population.”
While 2019 was expected to be the year of the single currency rebound, significant headwinds to economic growth persist, pushing back expectations for Euro appreciation until later in the year if at all.
5. Swiss Franc (CHF)
Swiss Franc to Pound Sterling (CHF/GBP) exchange rate = £0.7646
Coming in at fifth is the Swiss Franc (CHF) with a Franc-to-Pound (CHF/GBP) x-rate of 1 CHF to £0.7646.
With a prosperous and modern market economy benefitting from low unemployment, a highly skilled labour force and GDP per capita among the highest in the world, the Swiss economy represents a highly diversified robust economy led by financial services.
While a strong currency is considered the hallmark of a solidly established developed market economy, the Franc’s strength has significantly dented the Swiss export market , weakening the country’s growth outlook and capping GDP growth to below 2% (2011 – 2017).
6. US Dollar (USD/$)
US Dollar to Pound Sterling (USD/GBP) exchange rate = £0.76420
With the most technologically powerful economy in the world and a GDP per capita of around $57,300, the US Dollar makes an unsurprising entry at sixth on the list with a current Dollar-to-Pound (USD/GBP) exchange rate of £0.76420.
Industry-wise, US firms are at, or near, the forefront in technological advances with businesses setting the global benchmark in the computing, pharmaceutical, medical, aerospace and military equipment sectors.
2018 saw the Greenback appreciate against a basket of peer currencies as central banks around the world remained side-lined while the Federal Reserve conducted four upwards rate adjustments. Expectations of hikes into 2019 remain muted with a bearish US Dollar (USD/$) narrative expected to develop as the year goes on.
7. Canadian Dollar (CAD)
Canadian Dollar to Pound Sterling (CAD/GBP) exchange rate = £0.5821
The Canadian Dollar’s (CAD) oil-coupled nature saw the Loonie drop sharply against its US counterpart through Q4 2018 amid plummeting oil prices which saw both West Texas Intermediate crude oil (WTI) and Brent Crude oil (BCO) slump by upwards of 40%.
Canada currently represents the sixth-largest oil producing nation in the world with his expected to rise given the country’s ranking as third (behind Venezuela and Saudi Arabia) in terms of proved oil reserve levels.
8. Bruneian Dollar (BND)
Bruneian Dollar to pound Sterling (BND/GBP) exchange rate = £0.5666
An energy-rich sultanate on the northern coast of Borneo (Southeast Asia), Brunei benefits from a largely well-educated, English-speaking population, solid infrastructure and a stable government with an agenda to promote foreign direct investment in the nation.
Oil and natural gas production account for roughly 65% of GDP and 95% of the sultanate’s exports, with Japan representing the primary export market.
Overseas investment supplements the oil-rich nation’s income meaning Bruneian citizens pay zero personal income tax while benefiting from free medical care and education through the university level.
Looking ahead, the Bruneian government intend to ramp up plans to diversify away from hydrocarbon-based exports with a focus on information and communications technology and halal manufacturing. Trade figures over recent years have increased steadily following integration into the ASEAN economic community.
9. Singapore Dollar (SGD)
Singaporean Dollar to Pound Sterling (SGD/GBP) exchange rate = £0.5662
Just pipping the Libyan Dinar at the post, the Singaporean Dollar comes in ninth on the list with a Singapore Dollar to pound Sterling (SGD/GBP) exchange rate of 1 SGD to £0.5662.
With massive FDI appeal and a highly developed free-market economy, the Singaporean economy enjoys a n exceptionally open, corruption-free environment with stable currency rates and a GDP per capita comparable with the world most developed economies.
Singapore’s economy relies heavily on exported goods with significant dependence on consumer electronics, information technology products, medical and optical devices and pharmaceuticals.
Singapore also benefits from a solid tourism industry, attracting visitors from around the globe.
Given the Singaporean economy’s dependence on exports, sluggish global demand saw 2014-17 economic growth dip below the decade-long average, coming in at under 3% (yoy). Persistent weakness as global growth cools and demand drops represents a significant risk for the Singaporean economy moving forward
10. Libyan Dinar (LYD)
Libyan Dinar to Pound Sterling (LYD/GBP) exchange rate = £0.5507
Rounding off the list is the Libyan Dinar (LYD) with a Libyan Dinar to Pound Sterling (LYD/GBP) exchange rate of £0.5507.
Another oil-based economy, Libya depends heavily on revenues generated by the petroleum sector with these accounting for over 95% of the nation’s export earnings and over 60% of gross domestic product (GDP).
A civil war between 2014 and 2016 alongside plunging oil prices (which fell to seven-year low during the period) forced the Central Bank of Libya to fund subsidies for fuel and food not to mention government salaries leading to an estimated budget deficit of around 17% of GDP in 2017.
Plans to transition the Libyan economy away from Qadafi’s socialist-leaning model have all-but stalled amid persistent political chaos. Despite the nation’s robust oil reserves and the revenue generated therefrom, the middle-eastern nation suffers from regular widespread power outages and poor living conditions, including limited access to clean drinking water, health services and general security.
So there we have it, the top 10 most expensive, or strongest, currencies against the Pound Sterling (GBP/£) for 2019 so far. Looking at the above list, a couple of common themes are immediately clear.
Oil-rich nations with a high reliance on hydrocarbon-based exports and the revenue therefrom make up the largest ‘chunk’ of the list. It’s not a hard rule however that oil reserves equates to a strong currency. The two nations with the world’s largest proven oil reserves, namely Venezuela and Saudi Arabia, don’t even make the cut.
Developed open-market economies make up the next sizeable group with this including the Euro (EUR/€), US Dollar (USD/$), Swiss Franc (CHF) and Canadian Dollar (CAD). The Pound Sterling (GBP/€) would also fall into this bracket.
