Kuwaiti Dinar is the national currency of Kuwait, a country situated between Iraq and Saudi Arabia. Presently, Kuwaiti Dinar is the world's most expensive national currency, and it has held that position for a long time. What could be the reasons behind the Kuwaiti Dinar becoming such a highly valued currency? Let's get into it.
When Kuwait achieved independence from British rule in the 1960s, the Kuwaiti Currency Board devised a new national currency, the Kuwaiti Dinar, to substitute the Gulf rupee, which had previously been used in the region. The Kuwaiti Dinar was used alongside the Gulf rupee for some time before India devalued the latter currency against the Indian rupee, causing its use in the Persian Gulf to plunge. As a result, the Kuwaiti Dinar was given a clear path to rise.
However, when Iraq invaded Kuwait in 1990, the Iraqi Dinar took over as the official currency. Nevertheless, the Kuwaiti Dinar was reinstated as the country's currency after the war ended, and a new banknote series was launched.
Now that we have established the history of the currency let's look into why it is so expensive.
Firstly, it is important to include some background information on the nature of exchange rates. In a nutshell, countries can have one of three types of exchange rate regimes: floating, fixed, or a combination of the two. As the names suggest, floating means that the exchange rate is allowed to fluctuate depending on market factors, while fixed means that the exchange rate is set to either a single currency or a basket of currencies. Countries also combine these two schemes, leading to what are known as hybrid exchange rate regimes.
Kuwait's Dinar has been pegged. It was originally indexed to the pound sterling, which served as the official currency of the United Kingdom and its overseas territories. However, due to changing conditions, the Kuwaiti Dinar has been pegged to a variety of other currencies since then. From 1975 to 2003, it was pegged to a basket of currencies selected by the Kuwaiti Currency Board. After that, in 2003, the Kuwaiti Dinar was pegged to the US dollar at 0.29963 dinars to One dollar. That was the case until 2007 when the Kuwaiti Currency Board returned to a basket of currencies.
For a long time, the Kuwaiti Dinar has been the world's most valuable currency due to the oil-rich nation's economic stability. Kuwait is one of the world's leading oil exporter. Its proven crude oil reserves are estimated to be 104 billion barrels or 10% of the world's reserves. The country's economy is heavily dependent on petroleum goods, accounting for more than 80% of the Kuwaiti government's income.
On the global market, crude oil is in high demand, and Kuwait has plenty of it. As a result, they profit from pegging their exchange rate at a high level since their exports are much more valuable than their imports.
Furthermore, the Kuwaiti government has been investing heavily in the Kuwait Investment Authority's sovereign wealth fund, which is a prudent development in light of the future. Factors like these contribute to the Kuwait currency being the highest in the world.
The INR to KWD rate is the most common Kuwaiti Dinar exchange rate. The Indian expat community in Kuwait is very powerful, which is why this currency pair is so common.
CURRENCY NAME1 KUWAITI DINAR BUYSUS DOLLAR3.32 USDPOUND STERLING2.36 GBPEURO2.74 EURINDIAN RUPEE243.28 INRJAPANESE YEN362.90 JPYCANADIAN DOLLAR4.02 CADAUSTRALIAN DOLLAR4.28 AUDCHINESE YUAN21.40 CNYNEW ZEALAND DOLLAR4.61 NZDHONG KONG DOLLAR25.81 HKGSWISS FRANC2.99 CHF
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The pound sterling (GBP) is the currency of the United Kingdom. It is one of the world's oldest currencies. It is also Ireland's official currency and the fourth most exchanged currency on the international currency market.