This article was updated on January 2, 2020
Whilst saving is rarely profitable, and especially since 2008-2009 and close to 0% interest rates, we are all interested in ensuring we are earning, saving or investing in a safe currency.
This article will discuss the most stable currencies during a recession.
For any questions, or if you are looking to invest, then you can contact me using this form, utilising the WhatsApp function below or by emailing me (advice@adamfayed.com).
Introduction
The Singapore dollar, Japanese yen, Swiss franc and US dollar are the main currencies that you need to buy in case of crisis, according to a report by analysts at JP Morgan banking holding based on an analysis of the last five recessions in the world. ‘
A recession happens when lenders simultaneously ask borrowers to get their money back.
Three of the four leading currencies in the world that can be held during the recession are the money of those countries that can boast of very strong positions in foreign markets’, the analytical report said.
According to experts of JP Morgan, among the listed currencies the most reliable is the yen. Singapore dollar is less attractive for investment.
At the same time, the US dollar does not lose its reliability, since the US national currency is the main one for financial transactions. In particular, during global shocks, businesses around the world have to buy up US dollars to calculate their debts.
According to analysts, at the same time, it is obviously necessary to get rid of emerging market currencies (for example, Russia), since they are especially noticeably depreciating in crisis periods and “sagging” by an average of 17% during the two-year period since the beginning of the recession.
Nevertheless, JP Morgan believes that public discussions about the allegedly impending new full-blown crisis are “premature” today. However, analysts advise drawing up plans to diversify foreign exchange savings for businesses in the event of unforeseen circumstances in the global economy amid the escalation of international trade relations.
Speaking about the accumulation of funds, currency operations and exchange immediately come to mind as a way of saving. As practice shows, storing money in national currency is very unprofitable.
So in this article we will talk about the most stable currencies that won’t let you down, and will save your funds in a forceful crisis situation.
- Currency value: what does it depend on?
In ancient times, when the concept of national currency did not exist yet, and commodity exchange already existed, the first money began to emerge, it was made of gold and silver and had real value and weight.
But over time, it became too expensive to use precious metals, and paper money was invented. Their release is strictly limited to real gold and foreign exchange reserves, and you cannot print them as much as you like.
The value of the national currency is formed depending on the country’s development and its economy, the size of the gold and foreign exchange reserve, economic relations between countries, global commodity circulation, the country’s investment attractiveness, and the goods it sells and buys.
The most expensive currencies have developed economies. This is due to the stability and reliability of the country’s economic well-being.
Moreover, it doesn’t matter whether it’s a large country or very small, for example, Switzerland, but due to its status and reliability, the currency of this country is one of the most expensive in the world. It is not for nothing that many choose Swiss banks to save their savings.
Even Swiss watches have the status of the most accurate, reliable and durable. And this once again emphasizes the level of development of the state.
- Top 10 world currencies for stability.
Probably, for most citizens, when the word “currency” is mentioned, the first thing that comes to mind is dollars and euros, although the second is probably a little less.
The dollar has become for the whole world the most popular currency, which is recognized and accepted for calculations by most of the countries of the world. Although in fact, the level of its reliability is far from in the first place.
How are things today with the leaders of the foreign exchange market? To get an answer, it is enough to analyze real data on the value of different currencies. And here is what we get:
Swiss Francs (CHF)
We have already focused on the fact that Switzerland is rightfully called one of the most developed countries in the world and at the same time has one of the most expensive currencies in the world.
The country’s economy is designed to maximize the support of its own franc, even forming a reserve fund with 40% franc reinforcement.
The main emphasis in the development of the country is on the development of the banking system. Swiss banks are not only the most reliable in the world, but also guarantee complete confidentiality to their own investors. It does not matter who wants to make a deposit and how much to place on the bank accounts, everyone will be under reliable protection of a secured bank secret.
Frank is not inclined to sharp jumps and falls, it is this guarantee of the stability of economic development. Even in times of global crisis, the country created conditions for the natural growth of the national currency.
Moreover, the inflation rate over the past decades does not exceed 0.5-0.6% per annum.
Kuwaiti Dinar (KWD)
Kuwaiti dinar can rightfully be called the most expensive currency in the world. He has held his high position for over 20 years.
Such a high level of currency development is achieved due to the stability of the development of macroeconomic indicators of the country, and one of the main components – giant oil production in the world.
Like most other currencies, the dinar is still pegged to the dollar, and even having the status of the most expensive and stable, it cannot compete with the dollar for popularity.
It is worth paying tribute to this currency for its resistance to various recessions in the economy, but most likely it will never be possible to make it a reserve currency.
Buying currency in the public domain is very difficult, most often it is available at auctions and financial trading markets.
Bahraini Dinar (BHD)
Another dinar, which is second in its high cost, is Bahraini. Bahrain is one of the developed powers, whose main composite GDP is formed due to oil exports.
An important feature of Bahrain is its free economy. It provides an opportunity for free employment of foreign workers, this makes the country as interesting as possible for both workers and investment.
Omani Rial (OMR)
Oman is a country with an absolute monarchy in which there is really no unemployment and the homeless.
When creating a high standard of living for its citizens, the country is actively developing and maintaining its own currency at a very high level.
The main export item is black gold, which helps the rial for several decades to occupy high positions among the most popular, expensive, and, most importantly, stable currencies of the world.
Japanese Yen (JPY)
Japan increases the level of development of the country, and with it the rating of its national currency also grows.
The yen is one of the ten most stable currencies in the world, due to which more than 1/5 of the transactions in the foreign exchange market are carried out with its participation.
In confirmation of its stability, the level of annual inflation – it does not exceed 1.2%, and the last denomination was in Japan 65 years ago. Do not forget to mention the country’s gold reserve: Japan is in 8th place among the countries of the world in gold reserves. And this once again underlines the level of development of the country, which even a nuclear disaster could not bring down.
Pound Sterling (GBP)
One of the most attractive currencies for investing money is the pound. This is the national currency of Great Britain and Northern Ireland. It is worth noting that its rate is higher than that of the dollar, almost 2 times, and this is guaranteed access to heavyweights among world currencies. For many countries, this is the reserve currency of the state.
Euro (EUR)
Another young but powerful currency in the world is the euro. For many countries, it acts as a reserve, and although it is prone to jumps, like the dollar, it will no longer be able to decline and lose its status.
The euro is used in all EU countries and helps to pull the economy to less developed countries, which itself is seriously affected. For those who decided to keep their savings in euros, the forecasts are not entirely comforting, because of the protracted European crisis, the euro may still lose its position and fall almost to the dollar, although these will also be temporary currency difficulties.
US Dollar (USD)
So, this is the most demanded, exchanged and popular currency in the whole world. Almost 90% of transactions in financial exchanges are conducted using the dollar.
This is not only a reserve currency for many countries, but also a national currency, and not only for the United States, but also for El Salvador, for example. In some countries, the dollar is used for everyday life on a par with the national currency.
Of course, the dollar is unlikely to collapse to its historical minimum, but let’s not forget that America has long had no gold reserves of its own. Although their country is highly developed, the reality is that the dollar is, in fact, an unsubstantiated piece of paper whose real value is many times overstated.
But if you plan to save your money in dollars, you cannot worry, in the coming years, 50 dollars will occupy its stable position in the foreign exchange market.
Swedish Krona (SEK)
The Swedes are prudent and thrifty people, among them there are not too poor, for people the state provides many benefits.
Swedish financial policy is based on the fundamental principle of maintaining the exchange rate of its national currency.
Due to this, there is practically no inflation and devaluation in the country, which helped the krone to become one of the most stable currencies in the world, and, accordingly, earn reliable status.
Let us also pay attention to the fact that, even as a European state, Sweden is not going to abandon its currency for the sake of the euro, but on the contrary, the exchange rate is aimed only at its strengthening and further strengthening.
However, if you plan to start buying a crown to save your own money, then such an investment is not entirely justified. Although the country’s economy is one of the most stable, the exchange rate for this currency is still “buoyant”, and this is a signal for investors to think about.
Australian Dollar (AUD)
Another satisfied stable currency is the Australian dollar, which is the national currency of the whole mainland with adjacent islands.
At the same time, this dollar is used not only in Australia; it is turning out quite well in the world as a whole.
Due to its isolation, Australia is less susceptible to global crises, but the exchange rate is still associated with the import of raw materials for the chemical industry, oil, agricultural products supplied by the country to the world market.
Many buyers willingly make settlements with the country in its national currency, after purchasing it from exchange brokers and at auctions.
- How to buy exotic currency?
If you decide to choose some exotic as your home reserve currency: Swiss franc, Yuan, dinars or yen, then you can look for them in banks.
If you contact the central branch of the bank, you can try to place an order for rare banknotes if they are difficult to find in small branches.
We do not recommend using exchangers or buying from speculators. The probability that you will buy is not what you need, that you will be offered an overvalued course or even slipped a fake is very high. Especially if the real difference when buying at the bank and the exchange is calculated in a couple of tens of rubles, it is better to play it safe and be sure that you will buy the currency you really need.
Another advantageous solution, if you, of course, travel abroad, is to purchase currency directly in the country. So it will be very profitable to buy currency immediately on the spot. But if you go directly for the currency, it will be completely irrational.
In summing up, we note that all experts recommend dividing their assets and storing them in at least 2 different foreign currencies.
Saving in rubles is also possible, but in this case it is better to put money in the bank, albeit at a small percentage, but then the probability that inflation will gobble up your savings will be much less, but you will hardly be able to earn extra money in this way.
- What we do not recommend?
Firstly, currencies aren’t an investment. Saving money is always a losing game compared to investing it.
We do not recommend the currencies of African and Latin American countries. They continue to show negative dynamics against the backdrop of a regression of national economies. Argentina’s GDP fell 1.7 percent, inflation exceeds 50 percent.
Hong Kong may enter the recession. Amid social unrest that swept the region, the economy is collapsing. In the third quarter of last year, GDP fell by 2.9 percent, with regression going on from the second half of 2018. And the forecast is still disappointing. But while the Hong Kong dollar is relatively stable, it has even strengthened against the US in recent weeks. However, it may be the next victim of protests. We do not recommend investing in it.
The Chinese Yuan, in our opinion, also does not suit the role of asylum. Its course is approaching 6.9 per dollar. I remind you that it was from this level that a sharp drop began last summer.
Against the backdrop of the trade war, China’s GDP growth is rapidly slowing, and inflation jumped to 4.5 percent. Corporate bond defaults are one of the burning topics of recent times.
- What currencies can become leaders in the coming year?
Firstly, it can be a ruble. In favor of the strengthening of the ruble is an increase in reserves and a budget surplus, the debt burden is the smallest among the G20 countries, a positive trade balance and current account balances, an increase in export commodity prices and a reduction in geopolitical risks.
If the price of oil rises in the range of 75-80 dollars per barrel, then the ruble may strengthen against the dollar in the range of 50-55. In addition to the ruble, among the currencies of developing countries, it is worth paying attention to the Kazakhstan tenge. This currency has limited convertibility, but it can be bought on the Moscow Exchange. A fund and bonds nominated or otherwise tied to tenge are also available.
The economy of Kazakhstan is growing at 4.3 percent per year, with similar dynamics in industrial production. The debt burden is about 20 percent of GDP. In the ranking of ease of doing business, the country is in 25th place. The national currency has strengthened by 4 percent for six months. And we expect that on the horizon of 12 months, the KZT will strengthen against the dollar by 5 percent.
But the currency that has a high risk chance is the Turkish lira. In Turkey, low labor market indicators – the employment rate, according to local statistics, is 46 percent (for example, 76 percent in the UK), unemployment is 13 percent, and the average wage of a skilled worker is $ 480. This is on the one hand.
And on the other hand, the Turkish economy formally emerged from the recession in the third quarter of last year. Inflation fell below 10 percent, money market rates are falling. So there are signs of economic recovery. External debt is relatively low – 30 percent of GDP, which means there are more chances for economic growth. The Turkish stream will also give a push. So the currency of this country is worth a look. But remember that the main risk here is geopolitical. Aggravation of international conflicts, as well as US sanctions, can suspend the process of economic recovery and depreciate the lira.
- Final Opinion.
The best currency is the currency of a strong state with a developed economy. It does not matter the area occupied by the country on the map, but the availability of support and competent management often raise the national currency to the level of the world reserve, and raise it.
Support for the national unit of account is provided by the country’s gold reserves and world trade. Therefore, the country’s share of gold in the total foreign exchange reserve, and the GDP indicator determine the reliability of the currency.
It matters what place this country occupies in the world community, its geopolitical position and other factors that affect the country’s rating. The more influence, the stronger the currency on a global scale (not within the borders of a single state).
The head of the Pento Portfolio Strategies investment fund, Michael Pento, said that due to the outbreak of coronavirus, the global economy will be in a state of recession as early as the first quarter of this year.
He noted that the central banks of China, the United States and many other countries are printing money on an unprecedented scale, trying to mitigate the effects of the pneumonia epidemic, but this will not help.
Mike Pento emphasized that he would be lucky if the US GDP growth rate was 1%. Most of all, recession threatens those countries whose economies are significantly dependent on China, in particular Singapore and Australia. They have already reported the risks of a recession. In addition, troubles threaten the eurozone.
The US economy has proven much more resilient to the coronavirus epidemic and downturn in China. So, the index of manufacturing activity in the New York district Empire Manufacturing in February rose to 12.9 from 4.8 in January.
This supported the exchange rate of the American currency. They benefit from the crisis and the currencies of several other countries, in particular, the Swiss franc.
Further Reading
Can you beat inflation by saving these days? Sometimes you can as the article below explains.
