Currency trading is not for the faint of heart. The recent rapid rise of the Swiss Franc against the Euro showed overleveraged Foreign Exchange (FOREX) firms just how painful it can be.
Currency exchange rates are affected by many factors, some of which are not under the direct control of central banks. Central banks can control interest rates, and thus indirectly control inflation, but other factors like debt levels, trade deficits, and national stability can make exchange-rate prediction difficult.
Traders do not normally buy a currency and hold it for fifteen-plus years, but what if you had decided to do so to celebrate the new millennium? What currency would you have invested in given the economic and political outlook at that time? Take a look at the list below to see currencies where you would have done well, and where you would have done badly.
Keep in mind that at this moment in time, the dollar is unusually strong against most currencies, and many countries have experienced cycles of strength and weakness.
Dollar Gains Against Weaker Currencies:
- Russia – Russia was reasonably constant, rising slightly from 28.13 rubles per dollar in 2000 until the middle of last year when sanctions and oil prices started to tank the Russian economy. The ruble hit a low mark of 72.45 in December and currently sits at 61.37 rubles per dollar. DOLLAR’S GAIN: 118%
- Japan – The Japanese Yen has dropped significantly over the last three years, but that was from a high point in October 2011 when one dollar was worth 75.74 yen. With the millennium as a reference, the change was not so large – from 102.41 yen per dollar in 2000 to 118.92 today. DOLLAR’S GAIN: 16%
Some less common but more egregious losing currencies include:
- Indonesian Rupiah – One dollar now buys 12,855 rupiahs, compared to 7,050 in 2000.
DOLLAR’S GAIN: 82%
- Iranian Rial – Several currency resets have taken the value from around 8,200 rials per dollar in January 2000 to 27,711 today.
DOLLAR’S GAIN: 238%
- Argentinian Peso – From near equivalency in 2000, the peso shrank to 8.716 Pesos per dollar in 2015.
DOLLAR’S GAIN: 772%
- Costa Rican Colón – The Costa Rica Colón (yes, that’s what it's called) was available in 2000 at 294 per dollar, now you can get 534.7 colón per dollar.
DOLLAR’S GAIN: 82%
- Rwandan Franc – From 334.38 per dollar in 2000, the Rwandan franc fell to 690.45 in 2015.
DOLLAR’S GAIN: 106%
- Syrian Pound – Syria’s currency fell from 42.785 pounds per dollar to 189 today. Given current events, this should be no great surprise.
DOLLAR’S GAIN: 342%
Dollar Losses Against Stronger Currencies:
- Swiss Franc – The aforementioned Swiss franc has shown a strong and steady rise against the dollar. In January 2000, a dollar was worth 1.594 Swiss francs; it is 0.9487 at the moment.
DOLLAR’S LOSS: 40%
- Chinese Yuan (Renminbi) – China’s booming economy and central economic control has helped to grow the exchange rate from 8.28 renminbi per dollar in 2000 to 6.26 per dollar currently.
DOLLAR'S LOSS: 24%
- Somali Shilling – There are very few obscure currencies that have done well against the dollar consistently over the years, but the Somali shilling is one – rising to 697.6 shillings per dollar today from 2,542 shillings per dollar in 2000.
DOLLAR'S LOSS: 73%
Keep in mind that currencies can change so quickly that this list may be outdated by the time you read it. If you are interested in any other exchange combinations over time, you can make your own historical chart at http://www.xe.com/currencytables/. Watch the hours melt away while determining the exchange rate of the Albanian Lek and the Tongan Pa’anga…or any other currency that strikes your fancy. Just do your homework and be careful before dabbling in FOREX, be it in leks or pa’angas.