: How are some currencies stronger than others even when their exchange value is low?

Question

For example, 1 Kuwaiti dinar = 3.26 USD = 266 INR, but the USD is strongest of them all

In: 9

Answer 1

It depends on international acceptance, really.

In the USD’s case, there was literally a whole conference that happened in the 1950s on how every international currency and transaction should be linked to the US dollar (instead of gold, which was the standard at the time). It was called the Bretton Woods conference.

That conference established the uniformity/strength of the USD as an *international* currency – not just a local one. And coming right off the back of World War 2, it seemed like a fabulous idea from the world’s strongest economy at the time. And it was also seen as required, because the British Empire was dismantling at a rapid pace, and the pound sterling (which was one of the strongest pre-war currencies) was staring at financial ruin.

And old traditions die hard. Not everyone accepts the Kuwaiti dinar as a recognised international currency for transactions.

A fun fact: the most universally accepted currency is still gold. Although of course, you don’t have gold coins used for transactions any more, it’s been said that push comes to shove, the world will go back to gold as a standard. It’s the one currency that remains strong even in the face of enormous economic upheaval.