Are you planning a vacation abroad? Do you have a budget set for your next big purchase? If so, currency exchange rate fluctuations could have an adverse effect on your finances depending on which countries you visit and what goods you buy. However, for all those travelling enthusiasts looking for the best travel destinations worldwide, a country with a weak currency can be a cheaper alternative.
Every day, worldwide, millions of people are exchanging currency. These transactions must be made accurately, so every country's currency must remain stable in value against other currencies. However, the value of any particular country's currency may vary with demand and market conditions. In addition, the value of a country's currency can be affected by the country's economic performance and its trade relationship with the rest of the world.
Additionally, a country's quarter-on-quarter rate and performance greatly help define the present state of affairs. In simple terms, a sharp decline in a country's currency is associated with a bad financial state. In contrast, an increment in its value indicates better stability. In the last few years, currencies of different countries faced global recession due to ongoing global pandemics.
Factors That Affects The Performance of A CurrencyDifferent working factors cause the downfall of any currency. For starters, if an underdeveloped nation falls into any natural calamity or financial emergency, it causes its currency to stumble. Here's a list of a few such factors that lead to the downfall of any country's currency:
Quarterly Performance of Currency
Weak quarterly performance of currency is associated with a bad financial state, whereas an increment in its value indicates better stability. Additionally, the country's domestic economy, including inflation rate, interest rates on government debt, and government budget deficit, also significantly affects currency value in the global market. Suppose the level of credit outstanding and the supply of capital in the economy are not balanced. It also leads to the devastation of a country's economy and its currency value.
The economy is like a balloon with air, once it loses air, it will fall, and the same is true with the economy. If the health of a country's economy is not up to mark, it will miserably lead to the downfall of its currency value. The economic recession starts due to unbalanced levels of supply and demand. Therefore, if there is excess supply in the market with less demand, it leads to depreciation in currency value against other currencies.
A crisis or situation that completes the nation economically may cause a downfall in currency value. To overcome a crisis, the government needs to increase its government expenditure or raise taxes to enhance its financial stability. The lack of these suggestions will lead to a severe downfall in the currency's value. For example, when terrorists attacked the US on September 11th, 2001, it created havoc in its economy and caused a devaluation of the US Dollar against other currencies.
Political turmoil has more impact on a country's currency than any other factor because the health of a country's economy is directly linked to political stability. The threat of recession makes market players nervous, and they start looking for safe havens in other developed countries with strong economies. To face that, the country must be able to control its expenditures and invest in other business ventures.
Technology & Education
Technology and education can also create havoc if they are not managed properly. If a country's technology is not updated with time, it causes chaos in the market, and we can see a significant downfall in its currency value. For example, the US once was the leading nation in technology, but now it is facing a downfall because of Apple & Samsung's dominance over the American market.
There are always two sides to an investment coin - one side is good for the economy, and the other can be harmful for any nation. If the country tries to invest in under-developed nations without proper planning and understanding, it may downfall its currency value. For example, the UK was once the leader in the market of gold until India came and made a significant impact. As a result, the UK Economy saw a downfall, leading to the devaluation of its currency.
It is always good if your country's currency appreciates against other foreign currencies because this will help you reap hefty benefits from trade with other nations using that currency as money. However, the problem arises when it appreciates more than what is acceptable for a nation's economy, which may cause inflation on its side.
List of Ten Weakest Currencies Across the WorldThe current major cause behind these bad performing currencies is the global pandemic. While Covid-19 has left humanity devastated for sure, it has also impacted different currencies across the world. Apart from health emergencies, many countries also implemented financial emergencies during this period.
Rating agencies like Moody's and S&P have published in their latest reports about how different currencies worldwide are struck by this worldwide pandemic. But, first, let us look at this list of countries that hold their currencies with the weakest value on one side.
Egyptian Pound (1USD = 18.66 EGP)
The Egyptian Pound is the official currency of Egypt, and it has been performing poorly ever since the last few years. Last quarter of 2016, it had a rapid downfall due to ISIS attacks on its tourism business. The value of EGP against USD has severely devalued from 8.0 to 18.0 within the last few years. The major cause behind this problem was the Egyptian government's decision to float the currency for quite some time now.
This bold move was taken to ensure financial stability and secure findings support from global organizations like the IMF. As a result, while Egypt is struggling with its bad currency performance, the market here is now filled with great opportunities for investors. Additionally, Egypt could be the perfect option for travellers looking for a cheap country with a beautiful destination.
Iranian Rial (1USD = 42250 IRR)
This Middle Eastern country has rich oil reserves. Still, due to poor management, consistent internal disputes and lack of good leadership, Iran never really made the most out of its natural gifts. Recently, Iran faced a rapid downfall against the USD due to US sanctions and economic unrest within the country.
While Iran was already struggling with its financial issues, Covid-19 proved a nightmare for Iran. As per the reports of global financial institutes, Iran is currently the worst-performing currency across the world.
Politically instability, lack of proper financial structure, internal turmoil and some poor decisions have brought this downfall to Rial. There is a sanction made by the Iranian government that restricts them from exploring new opportunities by bringing petroleum into the global market. Iran could be a culturally rich country that is also cheap for travellers from different parts of the world.
Vietnamese Dong (1 USD = 22,650 VND)
Vietnamese Dong is the official currency of Vietnam, an Asian country full of culture, natural beauty and opportunities. However, the sudden shift of its financial system from a centralized economy to a completely different market economy has dried out the value of the Dong in the financial world. Like other Asian countries, Vietnam has also struggled to make a stable position for its currency throughout its years of existence.
However, the Vietnamese government is now making comebacks as Dong has started to improve a bit but is still one of the weakest currencies. Vietnam offers many beautiful attractions and capitalizing opportunities as a growing Asian country for investors, businesses, and travel buffs. The landscape here is full of scenic natural views and culturally rich heritage, making it a must-have option on your travel bucket list.
Indonesian Rupiah (1 USD = 14,365.5 IDR)
This island country is no different from other options on this list regarding financial performance in the last couple of years. With significant risks to outflows of the country's capital and a shrinking mechanism of foreign exchange reserves, Indonesia has struggled with its currency for quite some time now.
Since there is no support from financial reserves for the bank of Indonesia (central bank), there is nothing they can do to cope with the rising prices of the US dollar. Moreover, approximately 35 to 40 per cent of assets of sovereign bonds Rupiah are held by foreign investors creating vulnerability in the capital flow system of this country.
While people and businesses struggle with Rupiah in their day-to-day lives, it has become a cheap travel destination offering many tourist attractions. From tribal villages and picturesque beaches to volcanoes, you can find many things to do here.
Laotian Kip (1 USD = 11, 345 LAK)
The Laotian Kip is the official currency of Laos, and it has been performing poorly ever since its inception. While other Asian countries are slowly moving toward a more open economy, Laos has been left behind when it comes to financial advancement. In the last couple of years, Laotian Kip has faced an extreme devaluation due to Capital Controls and a lack of monetary support from international bodies.
The major problem with this country's economic system is highly dependent on the Chinese Yuan. Many Chinese companies are investing in Laos as they offer a cheap labour rate here, making their products cheaper than in other countries in Southeast Asia. Unfortunately, Laotian Kip continues its currency downfall to date and is expected to drop even further in the upcoming years.
Uzbekistani Som (1 USD = 10,812.5 UZS)
Despite its recent developments, Uzbekistan is still lagging in the race to develop its currency with changing times. There have been reports that the Uzbek currency has been undervalued for some time now. Still, due to global financial turbulence and economic downfall, it has become a great investment opportunity for investors.
According to the IMF, USD is currently the 2nd most overvalued currency globally, which implies that USD demand will soon increase along with rising prices of oil, which will give rise to lower currencies. Therefore, even though Uzbekistan isn't one of the best destinations to go here with severe financial issues, this could be considered a good investment option for a few people looking for good returns.
Guinean Franc (1 USD = 9,002.5 GNF)
While the last few years have seen some marginal improvements in Guinean Franc, its position hasn't seen any surge. Many online currency markets have always stated that this currency will drop drastically in the coming times, and they have not been wrong with their declarations. It has got the country stuck with many inflation issues, which has led to a rapid downfall of the USD in the past couple of years.
Due to poor economic policies, poor management, and low oil prices, this country's local currency has faced massive value losses over the years. As a result, the daily trading activities of Guinea's currency can be affected by US Dollar and other foreign currencies such as Euro, Indian Rupee, and British Pound. As things are taking a downward spiral in this country, there is no telling what could happen to the Guinean franc in future.
Cambodian Riel (1 USD = 4,065.5 KHR)
Cambodia is not particularly a famous country in terms of global recognition and financial standings. However, Cambodian Riel is consistently known to remain among the bottom names on the list of top-performing currencies. In the past few years, this country has worked on its economic system to stabilize its currency and prevent any losses against the USD and other major foreign currencies.
However, poor management powers placed on the people of Cambodia have resulted in a rapid decrease of Cambodian riel against the USD. It has become the worst-performing currency in the last couple of months due to political turmoil, financial instability, poor economic policies and many other factors that might be out of control for the Cambodian government.
Paraguayan Guarani (1 USD = 7,089.86 PYG)
While it may sound surprising, Paraguay is also on this list of weak currencies. According to IMF, this country overvalued its currency against the US dollar and other major foreign currencies by almost 30 per cent, which implies that PYG could dive even further in the future. But, with the downfall of a currency comes the opportunities to strike better deals as a businessman or investor.
This means that USD is not the best place to invest your money right now. On the other hand, if you are looking for good returns on your money, Paraguayan Guaraní can be a good option as it keeps dropping against the USD. However, long term investments are always better than short term investments, no matter what kind of returns you would receive.
Ugandan Shilling (1 USD = 3,507.71 UGX)
Uganda is another name on the list of countries struggling to stand against western currencies like the Dollar, Euro and Pound. While many countries have stepped up their efforts to promote local currencies, Uganda has remained stuck with this system. According to IMF, this country overvalued its currency against the USD by a staggering 45 per cent which implies that this currency will continue on its downward trend in the coming months.
Many challenges keep the people of Uganda at bay from attaining financial freedom. As long as these challenges are not resolved, the Ugandan shilling can never provide good returns for investors or businesses, no matter how good it would perform against other currencies.
Suriname Surinaamsche Dólar (1 USD = 2,292.85 SRD)
Suriname is one of the smallest countries in South America, and its economy can never stand up to the might of the USD or any other major foreign currencies like the Euro, Pound or Yen. Suriname has always struggled to make its local currency relevant in the global financial world, but it just isn't performing well enough to beat other competitive currencies on the market.
The economy of this country is highly dependent on exporting its raw materials, such as wood and diamonds, which isn't a bad thing at all considering that these raw materials are really expensive in international markets. But if you are looking for better returns out of your investments, it is highly recommended to look into other major currencies, be it USD or those from European countries.
Some countries are constantly in trouble making a stand in the financial world with their currencies. Although some of them are more stable than others, they all struggle to attain decent returns on their investments, and many of them cannot provide good returns at all as a business or investors.
The good thing is that there are options for everyone that can fly you to these countries at low costs. Plenty of carriers from India, the Middle East, and Europe offer these cheap flights to several countries, including those mentioned above. You have to choose your best travel package from them and get the cheapest ticket possible for the most promising exchange rate.
Frequently Asked QuestionsWhat makes a country with a weak currency the perfect travel destination?
If you are one of those people who believe in the power of their country's currency, then it would be vital for you to stick with your native currency and keep at it until your country's currency becomes stronger. For many people, travelling abroad is an experience that will expand their knowledge about the world and provide them with new ideas.
How do I get a domestic currency sent to me from another country?
You can exchange foreign currencies for local currencies at any bank or foreign exchange office, provided that the exchange rates are positive for you. You can also use regular currency exchange services for the same purpose.
What are the risks involved in exchanging foreign currency for your local one?
There are multiple risks in sending and receiving money from a foreign country, especially when doing it illegally. You never know who is taxing you and how much taxes vary from country to country and state to state (depending on your location). Most foreign exchange agencies ask for your identification documents before allowing you to receive or send money abroad which makes them reliable options for you if you want to send or receive money regularly without any hassle involved.
Is it safe to invest in a country with a weak performing currency?
If you are fascinated by the concept of investing in places with weak currencies, you should stick to booking cheap flights to countries with weak currencies like Suriname or Uganda. However, you should always keep in mind that these aren't good places for long term investment due to their inability to perform well against other currencies.
Is there a possibility of my funds getting lost while travelling or exchanging currency?
There is no definite explanation as to why your funds get lost or frozen due to certain incidents. Still, it is highly recommended that you make sure that your information regarding the money exchanges remains strictly confidential and do not share any details about them with anyone else, including your family members or friends.