Currencies define a country’s economy – the stronger the currency is, the wealthier the nation would be. When a country’s currency appreciates, investors increase and businesses flourish. Trade would also be great for a country with a strong currency, as the population will be able to buy more goods and services in the international market because of the high purchasing power attributed to their nation’s currency. Currency is the term used by economists for any money that is in circulation. It also refers to the materials most commonly used as an exchange medium, just like coins and banknotes. Currencies can also refer to the monetary system used by a specific country. All of the money in circulation has an appointed value in them, depending on the performance of the country’s currency in the global trading market.
The value of currencies fluctuates, just like any investment options available to the public, such as bonds, stocks, shares, and properties. There are so many reasons why it moves either upwards or downwards, and the government is doing everything that they can to monitor all of these movements. One of the reasons why the currencies fluctuate is because of the law of supply and demand. If the economy of a country kept on becoming stronger, the currency’s value would rise. More people will benefit from these changes, and investors would start looking after the country, purchasing a bulk of their currencies and see how it becomes more valuable. The currency would also go up if the country has been showing a positive light on the international stage. A stable country with a strong economy would sound like a paradise to investors, and they would want to invest in a country that would provide them with safety and stability. As more businesses start to open, it would contribute to the country’s GDP, increasing the value of their currency once again. This cycle goes on and on, transforming the country into a haven for business people and entrepreneurs.
On the other hand, a negative perception of the country would result in the depreciation of their currency. When a country suffers a major catastrophe or is included in a civil war or international conflict, the value of the currency drops. Situations like these would result in a domino effect – a lower currency value would increase the risks for business people to open up their companies in the country, which would also lessen the number of jobs available to people. All of the exports would also experience a price increase, and the remaining business people relying on foreign exports would have to increase the prices of their goods and services to cope with their expenses. Similar to the cycle of currency valuation, a weak currency would go on and on until the country goes into an economic disaster that would further lead to local conflicts or even a civil war. The government should be wary about any changes experienced in the country they are leading because it only takes small mistakes, dealing with the currency, for a full-blown war to begin.
Today, several countries are experiencing local conflicts because the value of their currency dropped so much. Countries such as Venezuela, North Korea, and Iraq have one of the worst currencies on the planet. Their currency – the Venezuelan Bolivar, the North Korean Won, and the Iraqi Dinar, have experienced years of devaluation due to wars and local conflicts. The government could not do anything that would help alleviate the issues surrounding their country’s economy, and it will be taking a toll on their currencies and economies as wars and conflicts continue to rage. There is talk, however, that the Iraqi dinar could revalue and allow conversion for most to pre-war levels.
On the other hand, wealthy nations – especially the Middle Eastern countries that produce top quality oil – have the best currencies. Kuwait, Bahrain, and Oman all have currencies that can be traded for more than two US dollars per unit. These countries have been long dependent on oil and petroleum, and the economic miracle brought by these resources had a major positive impact on their economy. Their citizens are also taking advantage of the high exchange rates of their currencies against the US dollar, which is considered as the world’s primary currency. They could buy more goods and services because of the high purchasing power attributed to their country’s strong currency and stable economy.