Do you know what is the highest currency in the world? 1 dollar is equal to 75.11 Indian rupees. 1 Euro is equal to 86 Rs in India and 1 pound is equal to 102 Rs in India. But do you know which is the most expensive currency in the world? Here I am going to share about currencies all over the world. How does it work and why are these currencies highly valued?
Highest currency in the world.
The highest currency in the world is the Kuwaiti dinar. 1 Kuwaiti dinar is equal to 248 rupees in India. The question is what is the specialty of the Kuwaiti dinar that makes it so highly valued? Before going to talk about the Kuwaiti dinar we have to see its history. I am sure you will be shocked after hearing this, the currency used by Kuwait used to issue by the Indian government. The Reserve Bank of India used to make Kuwaiti currency and the name of the currency was Gulf Rupees.
It was very much similar to the Indian rupee. The main thing about this currency was, it could not be used in India. Now you must be thinking that why Kuwaiti people used currencies made by the Indian Government. The answer to this question is hidden in history. Britishers used to rule in the Persian Gulf area and Kuwait was the country in between. Kuwait was not entirely under the control of the Britishers.
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How was the Gulf currency introduced?
Throughout the years, the Britishers used to control Kuwait. The British government saw that the economy of Kuwait is too small. So they thought that they should use the same currency which was used in India. Initially, this was the decision of the British-Indian Government. But when India got freedom in 1947 then the government of India granted permission to use the same currency to Kuwait. At that point in time, Indian and Kuwaiti currency was the same. The economy of Kuwait was too low because oil was not booming at that time.
However, the oil was already discovered in Kuwait in the late 1930s. But due to World War II, Kuwait could not able to sell oil around the world. When India got freedom from the Britishers, they found a problem of Gold trafficking. Gold trafficking was happening in Gulf areas, they used to sell gold in India. They would take Indian currencies to the Gulf and exchange them for other foreign currencies. The Indian economy was suffering loss due to this. Due to this reason, the Indian government decided that they would use different currencies in Gulf countries.
They decided to keep the name of Gulf currencies, it is called Gulf rupees. The difference would be, they would not use Gulf currencies in India. Smuggling was stopped to a great extent. In 1961 Kuwait got freedom from Britishers and Kuwait became the first Arab country to create a constitution and conduct Parliamentary elections in 1963.
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How did Kuwait become so developed?
Kuwait became developed and financially stable till 1970. Kuwait also became one of the top press freedom countries at that time. A journalist has more freedom in Kuwait rather than in India. Kuwaiti Dinar was introduced in the early 90s by Kuwaiti Government. The price of 1 Kuwaiti dinar in Indian rupees was 13.33 Rs in 1960. After 1966 the Indian government had to devalue the Indian currency due to some reason. Oman, Qatar, and UAE started to create their own currency.
Currencies work at floating and exchanged rate around the world now. But this is exceptional for Gulf countries’ currencies. Kuwaiti dinar works at fixed exchange today, it is not fixed with a single currency however it is fixed with a basket of currency.
Why did Kuwait fix its currency?
Why Kuwait has fixed its currency? also Why India did not fix its currency? why does India keep its currency at a floating exchange rate? What are the pros and cons of this? The cons of fixed currency are, you will always be dependent on other currencies with your economy. If other’s countries get crashed then your economy will also be at a loss. The other problem is, if you peg your currency then you have to maintain your currency. In order to maintain it, you need to have a sufficient supply of foreign exchange reserves.
Here the question is, what is maintaining a currency? Fluctuation of changes in market supply will impact the currency whether you are on a floating exchange rate or fixed exchange rate. There was a reason why India kept Indian Rupees at the floating exchange rate in 1990. The reason was the foreign exchange rate was decreased. There is a benefit of a floating exchange rate. The central bank can supply the money if there is unemployment or low economic problem in the country. It can also devalue the currency in order to revive the growth.
There are so many disadvantages to a fixed exchange rate. Still, why do so many Gulf countries follow this same system? The reason behind this is, the economy of these countries runs on Oil based business. The market value of oils always fluctuates hence they always use a fixed exchange rate. Kuwait earns a lot of money rather than other Gulf countries. It has so many US dollars in reserve. That’s why they don’t have a problem maintaining the peg.
Conclusion.
Kuwait has one of the largest global reserves of oil in the world. Theoretically, Kuwait can fix 1KD as equal to 1000INR but they will have a problem maintaining the peg. They will need more foreign exchange reserves if they want to raise their fixed value. Balance of payment factors says Kuwait receives a large amount of money from other countries. They receive money in exchange for foreign investment and exports. The demand for currency is high hence its value is also high.
Apart from it, if we include non-government currencies in it then Bitcoin will be the top currency in the world. 1 Bitcoin is equal to 32 lakh rupees. The reason behind it, the demand for Cryptocurrency is getting more and more. People want to invest their money in cryptocurrency. There are so many countries that accept cryptocurrency today. People consider cryptocurrency as an asset rather than a currency. Apart from this Highest currency in the world is Kuwaiti Dinar.