Discovering the Most Valuable Currency

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Money makes the world go round, they say. But have you ever wondered what truly makes a currency valuable? Is it the strength of a nation's economy? The popularity of the currency? Or perhaps, something more intangible gives a currency its worth. In this article, Benzinga dives deep into the concept of value and discusses the most valuable currencies in the world.  

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How is the Value of Currency Determined?

The value of a currency is determined by its exchange rate, which is the amount investors are willing to pay for it in relation to another currency. For example, if one U.S. dollar can buy 0.85 euros, but the U.S. dollar gets stronger, then one U.S. dollar may be able to buy 0.88 euros. The exchange rate reflects the value of the currency.

Exchange rates constantly fluctuate based on supply and demand in the global market, which can be influenced by interest rates, inflation, capital flow and money supply. Countries can use different systems to manage their exchange rates, such as fixed rate or floating rate systems. In a fixed-rate system, the government sets a fixed value for its currency against another currency or a standard, such as gold. By contrast, a floating rate system lets market forces determine the value of its currency without intervention.

10 Most Valuable Currencies to Trade

When considering the most valuable currencies to trade in the foreign exchange market, it's important to look beyond their current traded value. Liquidity, volatility and economic strength all play a role in determining a currency's potential for profitable trades. Liquidity refers to the ease of trading a currency without affecting its price. Volatility measures how much a currency's value fluctuates over time. Economic strength reflects the country's performance behind the currency in terms of growth, inflation and trade. With these factors in mind, Benzinga has compiled a list of the top 10 most valuable currencies for trading.

1. U.S. Dollar (USD) 

The U.S. dollar is the most traded currency in the world, accounting for 88% of the daily volume in April 2022. It is also the world's major reserve currency, meaning many countries hold it as part of their foreign exchange reserves. The U.S. dollar holds great value as it reflects the economic stability and performance of the United States, the world's largest economy by nominal GDP and a significant exporter of goods and services.

2. Euro (EUR)

The euro is the official currency of the eurozone, comprised of 20 of the 27 member states of the EU. With about 341 million citizens using it as of 2023, the euro is considered one of the world's most valuable currencies. Its strength and stability reflect the EU's integrated market, high GDP and trade volume. The euro is also a major reserve currency and is widely used in international transactions.

3. Japanese Yen (JPY)

The yen is Japan's official currency and legal tender. As the third-largest economy in the world by nominal GDP and a major exporter of automobiles, electronics and machinery, Japan's economic performance and stability are represented by the yen's high value. It's also the third-most traded currency in the foreign exchange market and a widely adopted reserve currency. 

4. British Pound Sterling (GBP)

The British pound sterling is the primary currency of the United Kingdom and its territories. The country's strong financial sector, large trade volume and high standard of living contribute to the pound sterling's status as one of the most commonly converted and oldest currencies still in use today. 

5. Swiss Franc (CHF)

The Swiss franc is the currency of Switzerland and Liechtenstein, as well as the Italian exclave of Campione d'Italia. It is highly valued because of Switzerland's economic strength and famed stability, a country with low debt, a high standard of living and a strong banking sector. Because of its reliability, the Swiss franc is also a safe-haven currency, purchased during financial uncertainty.

6. Canadian Dollar (CAD)

Canada's official currency and legal tender, the Canadian dollar (CAD), is one of the most valuable currencies globally, reflecting the country's strong and stable economy. Canada's diversified economy, sound banking system and abundant natural resources contribute to its economic strength. The Canadian dollar is a benchmark currency, with several central banks holding it as a reserve currency globally.

7. New Zealand Dollar (NZD)

The New Zealand dollar is the official currency of New Zealand as well as Cook Islands, Niue, Tokelau and the Pitcairn Islands. As a developed country with a strong export sector and a low unemployment rate, the New Zealand dollar is highly valued. The Reserve Bank of New Zealand's monetary policy also shores up its value by promoting price stability.

8. Swedish Krona (SEK)

The Swedish krona (SEK), the official currency of Sweden, is one of the most valuable in the world. This is due to Sweden's economic stability, highly developed society and strong welfare system, all of which contribute to its high standard of living. The Sveriges Riksbank, the world's oldest central bank, is responsible for maintaining the currency's price stability.

9. South African Rand (ZAR)

The South African rand is the currency of South Africa. It is also used as a common currency in Namibia, Lesotho and Eswatini. The currency is highly valued, reflecting the economic potential and diversity of South Africa, the second-largest economy in Africa. South Africa is a major exporter of commodities such as gold, platinum, diamonds and coal. 

10. Australian Dollar (AUD)

The Australian dollar (AUD) is the official currency of Australia, including its external territories and three Pacific Island states. Thanks to Australia's robust economy, based on diversified exports, natural resources and a stable political system, the AUD is one of the world's most valuable currencies. The AUD is also a commodity currency, with its value tied to Australia's production and export of commodities like iron ore, coal, gold and agricultural products.

How Does a Currency’s Value Affect Forex Trades?

Economic performance, interest rates, inflation rates, trade balance, capital flows and market sentiment influence the value of a currency in forex trading. These factors affect the supply and demand of a currency, which determines its value. As a result, the exchange rate between two currencies changes constantly based on their supply and demand in the market.

The value of a currency also affects the profitability, risk and reward of forex trades. For instance, a trader who buys euros (EUR/USD) with U.S. dollars when euros are weak and sells it when euros trade higher makes a profit. However, the trader incurs a loss if the exchange rate moves in the opposite direction. 

Invest in the Most Valuable Currency Pairs With These Forex Brokers

Choosing a forex broker involves considering several factors, including regulations, fees, platforms, tools, education and customer service. To assist you in making a decision, Benzinga has prepared a comparison table of some of the top forex brokers available in the market.

Trading Currency Values

The value of a currency isn't just about its exchange rate or popularity; it's a complex blend of factors, including liquidity, volatility and economic strength. While major currencies like the U.S. dollar and euro are popular, there are also lesser-known currencies worth exploring. To be successful in currency trading, you need to understand the forces that shape currency values. You can make informed trades by carefully analyzing these factors and predicting currency values. 

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