Why is the currency of Kuwait so high?

As an expert in international finance and economics, I've been closely observing the dynamics of various currencies and their influence on global markets. One of the most fascinating aspects of this field is the high value of certain currencies, such as the Kuwaiti Dinar (KWD). There are several factors that contribute to the Kuwaiti Dinar's high value, and I'll delve into them in detail. Firstly, the Kuwaiti Dinar is a fixed rate currency. This means that its value is not determined by the fluctuating forces of supply and demand in the foreign exchange market. Instead, the Central Bank of Kuwait has established a fixed exchange rate for the Kuwaiti Dinar, which provides stability and predictability for the currency. This fixed rate policy is a significant factor in maintaining the high value of the Kuwaiti Dinar. Secondly, the Kuwaiti Dinar is pegged to the US dollar. This decision by the Central Bank of Kuwait is strategic and has profound implications for the country's economy. By linking the value of the Kuwaiti Dinar to a strong and stable currency like the US dollar, Kuwait ensures that its own currency also enjoys a high level of stability and confidence from international investors and traders. Thirdly, the oil export industry is a major contributor to Kuwait's economy, and the high value of the Kuwaiti Dinar is closely tied to this sector. Oil is priced in US dollars on the international market, and by pegging the Kuwaiti Dinar to the US dollar, Kuwait can maximize the profitability of its oil exports. When the value of the Kuwaiti Dinar is high relative to other currencies, it means that for every barrel of oil sold, Kuwait earns more in local currency terms, which can be a significant boost to the country's revenue. Fourthly, Kuwait has a strong fiscal position, with low public debt and substantial foreign reserves. This financial strength acts as a buffer against economic shocks and adds to the credibility of the Kuwaiti Dinar. Investors are more willing to hold a currency that is backed by a strong economy and a robust fiscal framework. Fifthly, the political stability within Kuwait also plays a role in the high value of its currency. A stable political environment is attractive to foreign investors, as it reduces the risk associated with investing in the country. This, in turn, can lead to increased demand for the Kuwaiti Dinar, thereby supporting its value. Lastly, the Central Bank of Kuwait's monetary policy is another key factor. The bank's conservative approach to monetary policy, which includes maintaining low inflation rates and ensuring adequate liquidity in the banking system, contributes to the stability and strength of the Kuwaiti Dinar. In conclusion, the high value of the Kuwaiti Dinar is a result of a combination of factors, including its fixed exchange rate policy, peg to the US dollar, the profitability of the oil export industry, a strong fiscal position, political stability, and sound monetary policy. These factors work together to create an environment where the Kuwaiti Dinar can maintain its high value and serve as a reliable currency in the global market.

Some of the reasons why Kuwaiti Dinar has a high value: First of all, it is a fixed rate currency, so it maintains its high value without being directly affected by market supply/demand. It is the central bank which has decided to peg the Dinar to the US dollar. Kuwait has nearly 10% of the worlds oil reserves.Dec 12, 2017