The 3 Highest Currencies in the World and an Explanation of Their Functions

The highest currency in the world – Currency is a unit of price as a legal payment [in every country. Each value is also different, so there are currencies from the lowest to the highest in the world. The rating is influenced by many factors, one of which is the exchange rate.

Well, Sinaumed’s must have known several currencies in the world. However, does Sinaumed’s really understand what the meaning, history and function of the currency itself is? If not, let’s look at the following information.

Definition of Currency

Currency as a means of payment and to carry out economic transactions in a country. The value also varies from one country to another. The difference between the value of a country’s currency and other countries is called the exchange rate.

Then, the term currency appreciation is an event if there is an increase in the value of the country’s own currency against the value of foreign currency. On the contrary, currency devaluation is an event when there is a decrease in the value of one’s own currency when compared to the value of foreign currency.

As for overseeing circulation as well as being the main producer of currency is the task of the central bank or financial authority of a country. As is the case in Indonesia, Bank Indonesia is the one who supervises currency circulation.

Definition of Currency According to Experts

Below will be explained further about the meaning of currency according to experts, including:

1. Cashmere

According to Kasmir, money is something that is generally accepted as a means of payment in a certain area or as a means of paying debts and purchasing goods and services.

2. Veithzal

Veithzal explained that money is an object that can be exchanged for other objects, as a calculating tool, a means of storing wealth and used to pay debts in the future.

3. Albert Geilord Hart

Albert Geilord Hart defines money as wealth that can be used to pay off a certain amount of debt at a time.

4. AC Pigou

According to AC Pigou, money is anything that is commonly used as a medium of exchange.

5. Denis Holmes Robertson

Denis Holme Robertson argues that money is anything that is commonly accepted in payment for goods and services.

History of Currency

Then how can that currency be used as legal tender like now, Sinaumed’s? Here’s an explanation.

History of Indonesian Currency

The legal currency in Indonesia is Rupiah. In fact, the Indonesian Rupiah is a sign of state sovereignty that all Indonesian citizens must respect and be proud of. The law that regulates currency is Law Number 7 of 2011.

The history of Indonesian currency can be traced back to the pre-independence and colonial times of the Windmill country where the Dutch guilder was the currency used in Indonesia at that time. Entering 1942 and the Japanese occupation, the type of military currency or gun pyo became a transaction tool along with guilders.

Indonesian independence and the defeat of Japan restored the position of the Netherlands along with the allies. In addition, the currency from Nippon was withdrawn and replaced with Netherlands Indies Civil Administration (NICA) money. In 1945, Indonesia banned the use of the NICA type of currency.

In 1946, the first currency issued by Indonesia was the Oeang Republik Indonesia (ORI), and was only valid until January 1950 with the currency of the United Republic of Indonesia (RIS) instead. Together with the shortness of the RIS government and the return of the NKRI form, the type of currency also stopped being used in August 1950.

With the opening of the country’s economy and the influence of global financial dynamics, policies were put in place to attract too much money in circulation in Indonesia. In 1953, Bank Indonesia replaced De Javasche Bank and issued the Rupiah currency.

History of world currencies

World history, especially in currency, is related to the development of human civilization. In ancient times, currency was unnecessary because the world’s population needed abundant natural resources.

When natural resources are running low and the human population is increasing, people must meet their daily needs by exchanging goods or bartering.

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The progress of the times has brought people to make a medium of exchange even though it is not yet in the form of currency. When humans began to be able to learn letters and writing, currency was found as a transaction tool.

Currency Function

In general, the function of currency is as a medium of exchange. The following are currency functions, including:

Exchange Tool

As a medium of exchange, money functions to buy goods or services offered. In ancient times, people exchanged an item for another item that had the same value.

However, in this modern era the exchange of goods or services is done with money. For example, a clothing seller receives money for the purchase of merchandise. The merchant receives the money and the buyer gets the clothes. So, the function of money as a medium of exchange that exchanges goods or services for money.

Count Unit

The unit of account means that money is used to show the value or price of goods and services traded. Without a unit of account, humans will find it difficult to determine the price of goods and services.

For example, a tie costs Rp. 10,000 in a store and a shirt costs Rp. 40,000. If someone is going to buy both, he has to pay Rp. 50,000. So, the function of money as a unit of account that determines the price of goods and services traded.

Wealth Storage Tool

As a means of storing wealth, money functions as part of one’s wealth. Money can be deposited in cash or in a bank account. For example, money to make sudden trips out of town, rent lodging and to pay for educational needs.

So, the function of money is as a means of storing wealth to save money for emergency purposes and as savings for the future.

Debt Installment Standards

Debt installment standards mean that money is used to pay off debts to various parties. People use money to pay off debts in cash or installments/credit.

Factors Affecting Currency Exchange Rates

The currency exchange rate is the meaning of the exchange rate. This rate can experience ups and downs every day. Then, what can affect the change in value? Here’s the explanation:

High Interest Rates

Related to inflation, interest rates will be raised by the government to attract investment from investors when inflation occurs. That way, the value of the currency will stabilize again.

Political and Economic Conditions

Countries that have stable political and economic conditions will be more convincing in the eyes of investors.

Low Inflation

A country’s currency exchange rate will be high when the country’s civilization is prosperous and the inflation rate is low.

Public Debt

Countries with high debt will of course be assessed as weaker by investors, thus having a negative impact on currency exchange rates.

Balance of trade

Export-import activities also affect currency exchange rates. If a country experiences an increase in exports, the demand for domestic currency increases, so that the domestic exchange rate strengthens.

Conversely, if a country experiences an increase in imports, the demand for the partner country’s currency will increase and cause the domestic exchange rate to weaken.

Government policy

This is related to the prosperity of the country based on policies by the government which then becomes the basis for investor interest and the strength of the country’s currency.

List of Lowest and Highest Currencies in the World

If currency is a transaction tool with different exchange rates, then what are the lowest and highest currencies in the world? Let’s look at the following explanation:

Venezuelan Sovereign Bolivar (VES)

The lowest currency in the world is the Venezuelan Sovereign Bolivar (VES), which belongs to the Venezuelan state. The country that has the lowest inflation rate in the world, with the lowest value of 1 USD equivalent to 1,552,540 VES.

Iranian Iranian (IRR)

Iranial Iran has an exchange rate of 1 USD equal to 41.908 IRR. The country that ranks second in the lowest currency in the world has a rapid black market development due to the Iranian government’s policy of limiting access to foreign currency for its citizens.

Vietnamese Dong (VND)

The Vietnamese Dong (VND) is the country with the next lowest currency in the world. This is because the economy is dependent on agriculture and has not been centralized in a market economy. The exchange rate of 1 USD to Vietnamese Dong is 23,002 VND.

Omani riyals (OMR)

The currency in the third highest ranking in the world is the Riyal belonging to the Middle Eastern country, Oman. Its strength is based on the country’s economy which relies on its abundant natural resources. 1 Omani riyal is equivalent to 2.6 US dollars.

Bahraini Dinar (BHR)

The Bahraini Dinar is the second country with the highest currency value in the world. 1 BHR is equal to 2.65 US dollars. The strong economy and high incomes from the energy and gas sector contribute to the currency’s high value.

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Kuwaiti Dinar (KWD)

The highest currency value in the world is the Kuwaiti Dinar. A stable economy and high demand for oil supplies from this country are the reasons for the strength of the Kuwaiti exchange rate. 1 KWD is equivalent to 3.32 US Dollars.

Types of Currency

Examples of currencies are the rupiah in Indonesia (IDR), the US dollar in the United States (USD), the Euro in the Eurozone (EUR) and the yen in Japan (JPY). There are a total of 180 currencies currently around the world. They are recognized as legal tender or legal tender by the United Nations (UN).

There are several terms and currency classifications, the following are:

Reserve Currency ( Reserve Currency )

The central bank holds it as foreign exchange reserves because of its relatively stable value and it is widely used in international trade. The US Dollar and Euro dominate, around 60% and 20% of global reserve currencies, respectively. Next there are Japanese yen, pound sterling, French franc, Chinese renminbi, Canadian dollar, Australian dollar and Swiss franc.

Hard Currency _

This currency has relatively stable purchasing power against other currencies from time to time. They come from countries with strong and stable economies and politics, including in terms of economic growth and inflation rates.

This hard currency is a means of payment and is widely used in international transactions. In addition, it also functions as a reliable store of value, so it is used as a foreign exchange reserve.

Another term for this currency is a strong currency or safe haven currency . Examples of hard currencies are the United States dollar, Euro, Swiss franc, British pound and Japanese yen.

Soft Currency _

This term is often referred to as a weak currency which refers to the currency of countries that have an unstable economy and politics. As a result its value fluctuates and depreciates significantly. Therefore, market participants tend to avoid.

Effect of Inflation

The main factor affecting the real value of money is inflation, in which the two have an inverse relationship. When inflation is high, the real value of money will fall. Prices of goods generally increase significantly, so that we get less goods for the same amount of money.

For example, when we buy a product for IDR 100. If the price goes up to IDR 200, we can only buy half of it. We call a condition when inflation increases significantly as hyperinflation which creates instability in the economy.

Likewise, negative deflation/inflation also endangers the economy. When the real value of money increases, we get more goods for the same amount. However, that hurts the business as they earn lower revenues and profits and assume a fixed sales volume. In addition, deflation can also increase the real value of debt ( debt deflation ).

Factors Affecting Currency Exchange Rates

There are several factors that affect currency exchange rates, including the following:

1. Exchange Rate System

If the government adopts a fixed exchange rate system, the exchange rate does not move to adjust supply and demand in the foreign exchange market. Conversely, under a free-floating system, exchange rates fluctuate according to demand and supply conditions.

2. Trade Balance

Exports drive the appreciation of the domestic currency by increasing the demand for it. So, its purchasing power strengthens relative to partner country currencies. Conversely, imports cause the depreciation of the domestic currency because it increases the demand for and purchasing power of the partner country’s currency.

Overall, the trade surplus leads to an appreciation of the domestic currency as exports exceed imports. Meanwhile, the trade deficit results in depreciation because imports are higher than exports or ceteris paribus .

3. Interest Rate Spreads

If the domestic interest rate is higher than the international interest rate, it attracts foreign capital inflows and increases the demand for domestic currency which leads to appreciation.

Likewise, a narrower interest rate spread due to an increase in domestic interest rates will also make the return on loan capital in the domestic market more attractive, thereby encouraging inflows.

4. Inflation Rate

Inflation represents an increase in the price of goods and services in general, including export products. High inflation makes domestic products more expensive and less competitive on international markets, reducing demand by overseas buyers. So, the results obtained, exports decreased and resulted in the domestic currency depreciating against the partner country’s currency or ceteris paribus .

5. Economic Policy

This policy is like an expansionary monetary policy that can increase the amount of currency circulating in the domestic economy. This leads to inflation and a decrease in the purchasing power of the domestic currency.

6. Speculation Activity

Speculation can affect exchange rates by buying or selling certain currencies, causing changes in demand and supply in the market. They usually take short-term profits by trading several undervalued or overvalued currencies .

That is the explanation of the highest currency in the world . So which books aren’t on the bookshelf right now, Sinaumed’s? If Sinaumed’s is still confused, still needs references related to currency, then you can visit sinaumedia’s book collection at sinaumedia.com .

As #FriendsWithoutLimits, we will always provide the best and most complete information for Sinaumed’s and get #MoreWithReading information with sinaumedia. I hope this article inspires you!

Author: Rosyda Nur Fauziyah

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