How is foreign currency priced?
Foreign currency is traded in pairs, for example, buying US dollars using British pounds. As a result, currency is always priced relative to another currency, known as the ‘exchange rate’.
Most currencies are ‘floating’, meaning their value fluctuates depending on demand and supply. However, some currencies are ‘pegged’, which means their value relative to another currency (such as the US dollar) is fixed at an agreed rate.
Exchange rates affect the cost of goods and services in a foreign currency. For example, if the pound strengthens against the dollar, a holiday in the US would cost less in sterling terms.
However, exchange rate movements also create an opportunity for investors looking to make a profit from trading in foreign exchange. We’ve produced a guide explaining the basics of foreign exchange movements, together with our pick of the best forex brokers.
Here’s the top 10 weakest currencies:
1. Iranian rial (IRR)
The Iranian rial is the weakest currency in the world, with 1 rial buying just 0.000024 US dollars (or, put another way, $1 equals 41,667 Iranian rials).
The Iranian rial was first introduced in the late 1700s. It was later pegged to the British pound, followed by the US dollar. Although now free-floating, the currency has remained at around 42,000 rials to the dollar over the past few years.
Iran is located on the Persian Gulf between Iraq and Afghanistan and is a leading global exporter of oil and natural gas. However, economic sanctions have put pressure on Iran’s currency, along with political unrest and high inflation.
2. Vietnamese dong (VND)
The Vietnamese dong is the second weakest currency in the world with 1 dong buying 0.000041 US dollars (or $1 equals 24,390 Vietnamese dongs). The dong entered circulation in 1978 and has a ‘crawling peg’ against the US dollar (meaning that it can fluctuate gradually over time).
Vietnam borders the South China Sea, with China, Laos and Cambodia as neighbours. Services account for the largest proportion of gross domestic product (GDP), followed by industries such as electronics, energy and textiles.
Vietnam’s currency has been undermined by restrictions on foreign investment and a recent slowdown in exports, together with rising interest rates in the US.
3. Sierra Leonean leone (SLL)
The Sierra Leonean leone is the third weakest currency in the world, with 1 leone buying 0.000048 dollars (or $1 equals 20,833 Sierra Leone leones). The currency was first introduced in 1964 and is free-floating.
Sierra Leone is in West Africa and borders Guinea and Liberia. Key exports include timber and minerals such as diamonds, gold and industrial metals.
The value of the leone has been dragged down by inflation of more than 40%, together with significant debt, a slowdown in economic growth and long-term effects of the Ebola outbreak.
4. Laotian kip (LAK)
The Laotian or Lao kip is the fourth weakest currency, with 1 kip buying 0.000049 dollars (or $1 equals 20,408 Lao kips). The kip was introduced in the 1950s and is free-floating.
Laos is a land-locked country between Vietnam, Thailand, Cambodia and China, and relies heavily on exports such as copper, gold and timber.
The country has been hit by sluggish economic growth, rising foreign debt and high inflation, which has put pressure on its currency.
5. Indonesian rupiah (IDR)
The Indonesian rupiah is the fifth weakest currency in the world with 1 rupiah buying 0.000064 US dollars (or $1 equals 15,385 Indonesian rupiahs). The rupiah was introduced in 1946 and was initially pegged to the US dollar before moving to a free-float.
Indonesia comprises over 17,000 islands in the Pacific, including Java, Sumatra and parts of Borneo and New Guinea.
It is the largest South-East Asian country by GDP, thanks to its services sector, and the country is also commodity-rich. However, the rupiah has fallen against other currencies due to high inflation and fears of recession.
6. Lebanese pound (LBP)
The Lebanese pound is the sixth weakest currency in the world with 1 pound buying 0.000066 US dollars (or $1 equals 14,925 Lebanese pounds). The pound was first introduced in the 1930s and is pegged to the US dollar.
Lebanon borders the Mediterranean Sea, as well as Israel and Syria. It has a service-based economy but also exports precious stones and metals, chemical products and food and beverages.
The Lebanese pound sank to a record low against the US dollar in early 2021, due to a deeply depressed economy, high inflation and unemployment, a banking crisis and political unrest.
7. Uzbekistani som (UZS)
The Uzbekistani som is the seventh weakest currency in the world with 1 som buying 0.000081 dollar (or $1 equals 12,346 Uzbekistani som). It was introduced in 1993 and is free-floating.
Uzbekistan is a former republic of the Soviet Union and is located in Central Asia. It’s one of the leading global cotton exporters and has substantial mineral and oil and gas reserves.
The country has been implementing economic reforms but continues to struggle with low economic growth, high inflation and unemployment and corruption.
8. Guinean franc (GNF)
The Guinean franc is the eighth weakest currency in the world with 1 franc buying 0.00012 dollars (or $1 equals 8,621 Guinean francs). The currency was introduced in 1959 and is free-floating.
Guinea is a former French colony in sub-Saharan Africa. It has an abundance of natural resources such as gold and diamonds but has struggled with high inflation, military unrest and an influx of refugees from neighbouring Liberia and Sierra Leone.
9. Paraguayan guarani (PYG)
The Paraguayan guarani is the ninth weakest currency, with 1 guarani buying 0.00014 dollars (or $1 equals 7,463 Paraguayan guaranis). It was introduced in 1952 and is free-floating.
Paraguay is landlocked and borders Brazil, Argentina and Bolivia. The country is a leading producer of soybean, stevia (sugar substitute) and beef, as well as exporting maize and sugarcane.
However, its currency has been under pressure from high inflation, corruption and counterfeit currency.
10. Ugandan shilling (UGX)
Last on the list is the Ugandan shilling, with 1 shilling buying 0.00026 dollars (or $1 equals 3,759 Ugandan shillings). It was first issued in 1966 and is free-floating.
Uganda is a land-locked country in East Africa, bordered by Kenya, South Sudan, Tanzania and the Democratic Republic of the Congo.
The country is rich in commodities such as oil, gold and coffee but its economy has been beset by unstable economic growth, high debt and political unrest.
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