What are some of the safest Asian currencies in 2021?

What are some of the safest Asian currencies in 2021? That will be the topic of this article.

My staff have looked at a range of factors which will influence the safety of different currencies.

My overall position is that every currency is risky compared to investing money long-term, because in a world of 0% interest rate, you are likely to lose to inflation with almost any currency.

If you are looking to invest in more productive assets, don’t hesitate to contact me, email (advice@adamfayed.com) or use the WhatsApp function below.

Introduction

What does the term “stable money” mean? Simply put, a stable currency is one that maintains its exchange rates, meaning that its rates do not change too much over time.

Whether it is a unit of account (a measure of value) or a medium of exchange, money is one of the characteristics of the entire payment system.

If the prices of many of the items you buy rise due to currency changes, you are losing purchasing power. In other words, with the money you have – your income and your savings – you don’t buy as much as you used to. This could lead to a price spiral.

This makes it difficult for you and businesses to plan for savings and investments. People can lose confidence in the currency as it quickly loses value. These are just a few examples of the negative side effects of high inflation.

As you can see, the currency stability is very important in nowadays, but how can we ensure it? There are two completely different ways to ensure currency stability.

The first and most common is having a currency available on the open market and matching the currency to market dynamics in such a way that it satisfies stable long-term needs. 

This is very evident in the case of currencies issued by modern nation states, which generally have only one currency to trade in their region. How this will evolve in the medium term with digital currencies is not so obvious as the monopoly of nation states is being called into question.

The second way is to secure control over both the issue and exchange of currency. According to this indicator, all game virtual currencies are potentially stable. Major currencies were also stable on this metric due to the backing of gold and other measures (that is, the lack of markets to exchange currency), but these days, everyone is playing in the markets (including governments).

If there is some kind of centralized control mechanism, you can switch between the two modes.

The currencies and their stability level is the most important point in business sphere. Every businessperson should know how stable the currency he’s working with is, to avoid future issues and money losses. Every year different experts try to understand and predict each currency’s future, the inflation or deflation, what will happen, etc. 

Therefore, in this blog post, based on experts’ opinions we will be focused on Asian currencies, especially on Chinese Yuan, as it is predicted to be the most stable currency after Euro. Pesos, rupees, baht, Singapore dollars and ringgits are will also be stable and safe for trading or investing.

Is 2021 the year of the Yuan?

When billionaire investor Ray Dalio recently predicted that the Chinese yuan would become the global reserve currency, the world took notice. 

This was a prediction that the Chinese government promoted through its own efforts. The question now is whether the coming Year of the Bull will bring significant changes needed to position the yuan and realize the ambitions of politicians.

Like a beauty contest, competition for reserve currency status is relatively attractive. International traders and investors must decide which of the currencies available to them is the most convenient to use, backed by the strongest financial system, and, perhaps most importantly, backed by a trusted sovereign. 

Today’s innovation is that both of the world’s top sovereigns also seem to be competing to reduce their credibility.

Relative attractiveness is difficult to quantify. However, at the heart of this concept is one factor that can be accurately measured: the size of the economy of the issuing country. 

As economist, Paul Krugman explained in his 1984 article, “a country’s currency that matters in world markets will be a better candidate for international money than the currency of a smaller country.” In other words, the globally dominant economy is the “hardware complex” for the international reserve currency.

China obviously has the necessary hardware. Since 2013, he has been the world’s largest trader, today his economy is larger than that of the United States in purchasing power parity and will soon come out ahead at market exchange rates. For these reasons, the yuan will become a competitor and ultimately outshine the dollar.

Since then, China has made great progress in improving the relative attractiveness of the yuan. Its economy continued to grow much faster than US GDP and became more resilient at the onset of the COVID-19 crisis. 

Its central bank has begun developing and testing digital currency. And across the developing world, clients of his Belt and Road Initiative are beginning to use the yuan in their growing trade and financial transactions with China.

But the dollar has proven its resilience. As Geeta Gopinath, chief economist at the International Monetary Fund, and her colleagues have shown, the vast majority of trade transactions are still payable in dollars and the dollar continues to play an important role in cross-border financing.

The main reason for the dollar’s resilience against the yuan is that the American economic hardware complex is complemented by powerful software: all the intangible qualities that sustain investor confidence – not least a strong banking system backed by a reliable sovereign. China definitely has a longer way to reach these areas.

To build confidence in its financial system, China needs to strengthen its highly leveraged and over-leveraged banks. Afterwards, it should remove capital controls and ensure much wider transparency so that investors could enter Chinese financial markets with the confidence that they know what they are buying. 

Then, the Chinese authorities must commit to maintaining the lifting of capital restrictions so that investors can be confident that they can always get their money out of the country. None of this can be done quickly, and it will take even longer to convince investors that change is irreversible.

Next level is the task of building confidence in the sovereign. China will need to convince other countries that it is and will remain a reliable economic partner. It will take even more time and effort, especially given that the Chinese government was heading in the wrong direction. 

China helped negotiate the recently agreed Regional Comprehensive Economic Partnership, but it has also used trade sanctions as a form of political punishment against one of its main trading partners, Australia.

Moreover, China is crushing free speech and democracy activists in Hong Kong without worrying about the implications for the city’s status as an international financial center. 

He also punished one of his leading entrepreneurs in the financial sector, Alibaba founder Jack Ma, while at the same time publishing a new “double circulation” strategy that unmistakably signals an inward turn in economic policy.

To be sure, the United States has raised questions about its own reliability as a financial partner, especially under President Donald Trump. 

For example, the Donald Trump administration’s restrictions and limitations against Iran prohibit US banks from dealing not only with that country directly, but also with any foreign banks that operate there. 

As a result, other countries – including many of the US’s friends and allies – are now realizing how vulnerable they are to unilateral US action. While the dollar’s dominance provides convenience, it now comes with a potentially high price – so high that Europe had to struggle to create its own cross-border clearing mechanism for trading.

More recently, the Trump administration again took direct action against China, ordering US financial institutions and investors to sever ties with some state-owned Chinese firms and remove three Chinese companies from the New York Stock Exchange. 

Since then, Chinese authorities have been planning retaliatory measures to protect Chinese companies from the slings and arrows of US financial dominance.

It remains unclear which country has done more to undermine confidence in its own software, so the dollar’s dominance cannot be assumed with certainty. China may still win the reserve currency competition either because the yuan is becoming more attractive or simply because the dollar has become less attractive.

Moreover, it is worth remembering that history is not on the side of the dollar. The late Charles P. Kindleberger, an economics historian at the Massachusetts Institute of Technology, predicted that “the dollar will end up in a historic dump along with the pound sterling, guilder, florin, ducat and, if you want to go back in time, the Levantine bezant.”

Whether any decisive transition from the dollar to the yuan will begin this year remains an open question. But when it comes to the long term, the Chinese leadership is confident about the prospects for their currency. 

They seem to be already convinced that their hardware complex will prove attractive despite the software flaws. A less subtle message to the world is that no matter what China does, the yuan will rule.

Other safest Asian currencies and why trade them in 2021

2020 was a very difficult year in all respects. The uncertainty that the coronavirus pandemic has brought to countries is not over yet. Markets collapsed, financial stability was disrupted, and states suffered a huge economic blow. Unemployment has risen markedly and the ongoing pandemic has affected currencies.

But it should still be said that some people have very much used the current situation to their advantage in terms of Forex trading. June was the hottest month for Southeast Asian currencies. Almost all of them have grown and have been able to offset the losses caused by the coronavirus pandemic.

While the Indonesian rupee, Thai baht, and Malaysian ringgit have shown gains then declines, the Philippine peso is now the best among Asian currencies in 2020. In particular, the Philippine peso is up 1% since the beginning of the year.

The Indonesian rupee, which is up 15 percent this quarter, could challenge the peso given the country’s strong external demand for debt. Here are some detailed factors that will affect Asian currencies in the second half of 2020 and could be critical for trading in 2021.

Let’s talk about some of the safest and stable asian currencies which you can consider in your financial activity:

Pesos

The dynamics of the peso exchange rate is partly due to the improvement in the current account balance: in April there was a record drop in imports of goods since 2009, as the borders of the island country were closed due to the coronavirus. Despite this, the volume of remittances has decreased.

The central bank of the Philippines has expressed concern about the rate hike. The regulator had to step in to stop this. Investors are awaiting conclusions on the future rate of the peso, which will be presented during a meeting of representatives of the central bank. The Philippine financial regulator is predicted to maintain the rates unchanged. The central bank had already cut its benchmark interest rate by 125 points earlier this year.

For people looking to find the best forex brokers in Asia, this chain of events is indeed very profitable to trade.

Rupee

Foreign capital has returned thanks to local debt raised following the sale of about $ 9.5 billion in government bonds in February and March. Since then, the country has received $ 996 million in cash flow, indicating the potential for further growth in the rupee.

The Central Bank of Indonesia still considers the national currency undervalued against the background of low inflation in the largest economy in Southeast Asia. The regulator expects the country’s current account deficit to fall to 1.5% this year.

Bath

The Thai Baht is up 5.8% this quarter, reducing its annualized loss to 3.4%. The positive current account balance of the country’s balance of payments triggered an increase in the exchange rate. Despite this, it is also showing a drop due to the lack of tourism revenue as a result of the coronavirus pandemic.

The obstacles to the growth of the Thai baht most likely come from the Bank of Thailand. Representatives of the financial regulator announced that they are ready to do anything to ensure that the exchange rate does not interfere with the economy.

Singapore dollar

The Monetary Authority of Singapore regulates the exchange rate relative to other major trading partners, which is a policy instrument of the financial regulator. The government does not use interest rates like other central banks do.

The easing of quarantine in the country was a positive factor for the local currency. In the future, a weak currency should be expected to spur growth in a trade-dependent economy.

In general, since the beginning of 2020, the Singapore dollar has fallen by more than 3%.

Ringgit

Volatility in oil prices and political instability have negatively impacted the ringgit, placing it at the bottom of the Asian currencies rankings. After falling more than 5% in the first three months, the ringgit rose slightly by 1% in the second quarter.

The financial regulator of Malaysia constantly provides data on the inflation rate, on which the future of the local currency will depend.

But what are the safest currencies in the world?

In order you want to trade or save with not only asian currencies, we have prepared a list of the currencies in the world that have been predicted to be safe in 2021. 

Making a decision to save (and executing it) is just the first step. It is important to have a strategy so that our money does not lose value while it is being held. One of the most beneficial is to invest in a stronger currency with less risk of devaluation.

According to many analysts, the best currency to support your savings in 2021 will be the euro. Anyways, let’s see what other currencies you can trust this year.

Swiss franc

Our list starts with the official currencies of Switzerland and Liechtenstein.

With such a strong economy and highly developed banking system in the country, the Swiss franc was to become one of the most stable currencies in the world. The peg to gold also raises the status of a “safe currency”.

In addition, the average annual inflation rate in the country in recent years has been about 0.6%.

Norwegian krone

Despite being far from expensive, the Norwegian krone came in third on our list of the most stable currencies.

This is because Norway is one of the very few countries in the world that has no net debt, meaning it does not need to borrow money to pay off the debt.

Another interesting fact about the Norwegian krone is that it is not pegged to any other currency. This is unlikely to contribute to the stability of the currency in a broad sense, but it shows the country’s course to support its national currency and, thus, to strengthen it.

Another interesting thing about Norway is that it has really valuable oil reserves. However, this is a double-edged sword, as the same factor can result not predictable currency changes.

Australian dollar

The Australian dollar is the national currency of Australia and its surrounding islands. Currency circulation covers a significant part of the globe, which led to its popularity. At the same time, Australia is cut off from major continents by virtue of its geographic location.

A stable government system and low unemployment rates add strength and stability to this currency. The Reserve Bank of Australia plays a major role in this: it oversees the printing of new banknotes and their introduction into circulation if necessary.

The Australian dollar is also called a commodity currency, because Australia supplies the world market with large volumes of agricultural products, oil and raw materials for the chemical industry, and it is more convenient to pay for goods with its national currency.

British Pound Sterling

The official currency of Great Britain and Northern Ireland is considered to be quite stable.

While many tourists believe that the British pound exchange rate is somewhat unfair and overvalued, others see this currency as an excellent investment solution.

As of 2019, the British pound sterling is ranked 4th as the world’s reserve currency.

Canadian dollar

It is believed that the US economy influences the Canadian dollar the most. This is due to its geographical proximity to the United States and large volumes of imports from the neighboring country.

Since 2013, the Canadian dollar has been ranked 5th as the world’s reserve currency.

The most stable money in the world – is it real?

So, is there a safe currency? The short answer is no. There are many factors influencing the effectiveness of a currency, and it is impossible to choose just one that beats all others with a big advantage for all accounts.

However, we live in a very rapidly changing world, and these are quite difficult times, so the situation can change dramatically. Who knows, maybe one day we will only have one currency stable enough to dispel all doubts about which currency is the most reliable.

There is no definitive list of the most stable or strongest currencies (oh, how we wish!). Also, you cannot base your investment decisions on the strength or stability of a currency alone. There are a number of factors to consider before investing in any currency.

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 253.5 million answers views on Quora.com and a widely sold book on Amazon

Further Reading 

In the answer below, taken from my online Quora.com answers, I spoke about the following issues and topics:

  • What is the first step of becoming a millionaire? Great ideas? A good network? Or something else?
  • Would I rather be a billionaire in a place like Myanmar or a poor person in a developed country like Japan? Even though this is only a theoretical question, I look at it from a logical perspective.
  • Is Shanghai still poor compared to Tokyo or Seoul? I speak about reality vs the general opinion which seems to be out there.
  • Does having a high-net-worth make securing business funding more likely? I mention how things have changed in this new business era, where starting your own business is cool, and there is loads of venture capital money out there willing to throw money at some founders.

To read more click on the link below.

Add a comment

*Please complete all fields correctly

Adam Fayed financial consultant WhatsApp