Kuwaiti Dinar shows up as the most expensive in the world. Does that mean I better invest in KWD (or the safe USD) instead of my home currency (IDR)?

A little background: I am just an ordinary person without economics / finance background and hope to learn from the experts here. My home currency never fails to show up in the top 5 least valuable currencies in the world. Economic crises that come too often and stay too long make me wonder if I make the right decision to put all of my retirement savings in local equity mutual funds.

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    Being the most highly valued currency unit is not the same as being the most stable currency.
    – BrenBarn
    Sep 28, 2015 at 5:44
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    The absolute value of one unit of a currency is just an arbitrary scaling factor -- it has no meaning. Don't make any decisions about currencies based on what one unit of the currency happens to be worth.
    – Mike Scott
    Sep 28, 2015 at 7:24
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    The strongest currency (at least the one that has the highest value) is Bitcoin :P. But as @BrenBarn stated it doesnt have to be the most stable, on the contrary Bitcoin is the most UNstable, which gives a good chance to make some nice pips trading it :P but big earnings can switch to big loses easily...
    – YoMismo
    Sep 28, 2015 at 13:12

4 Answers 4


First, currencies are not an investment; they are a medium of exchange; that is, you use currency to buy goods and services and/or investments.

The goods and services you intend to buy in your retirement are presumably going to be bought in your country; to buy these you will need your country's currency.

The investments you intend to buy now require the currency of whatever country they are located in. If you want to buy shares in Microsoft you need USD; if you want shares in BHP-Billiton you need AUD or GBP (It is traded on two exchanges), if you want property in Kuwait you need KWD and if you want bonds in your country you need IDR. When you sell these later to buy the goods and services you were saving for you need to convert from whatever currency you get for selling them into whatever currency you need to buy.

When you invest you are taking on risk for which you expect to be compensated for - the higher the risk you take the better the returns had better be because there is always the chance that they will be negative, right down to losing it all if you are unlucky. There is no 100% safe investment; if you want to make sure you get full value for your money spend it all right now!

If you invest overseas then, in addition to all the other investment risks, you are adding currency risk as well. That is, the risk that when you redeem your investments the overseas currency will have fallen relative you your currency.

One of the best ways of mitigating risk is diversification; which allows the same return at a lower risk (or a higher return at the same risk). A pure equity portfolio is not diversified across asset classes (hopefully it is diversified across the equities). Equities are a high risk-high yield class; particularly in a developing economy like Indonesia. If you are very young with a decades long investment horizon this may be OK but even then, a diversified portfolio will probably offer better rewards at the same risk.

Diversifying into local cash, bonds and property with a little foreign equities, bonds and property will serve you better than worrying about the strength of the IDR.

Oh, and pay a professional for some real advice rather than listening to strangers on the internet.

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    This answer makes the wonderful point that the retirement expenses will be to a large extent in IDR so it makes sense to have equity investments denominated in IDR. This works pretty well for a USD or EUR investor but Indonesia is such a small country that many of the goods (less so the services) will be "priced" internationally (think oil) and therefore holding a lot more international equity will be safer. If IDR has a big swing he/she will be protected as when the costs increase the investments will give out better returns.
    – rhaskett
    Sep 28, 2015 at 18:35
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    The point being holding the currencies is not a great idea as Dale says, but international equities are very good for @stelle.
    – rhaskett
    Sep 28, 2015 at 18:38
  • Thank you Dale and @rhaskett. If I may add a little more details: It is true that my expenses are in IDR as I live in Indonesia. However, as rhaskett pointed out, almost everything here is affected by currency rate. A big portion of items in my grocery list is imported (for quality reasons). I started saving early this year for a new iPhone and a trip to HK at the year end, and now find that it can't keep up with the currency rate hike. That's when I started wondering about my retirement savings. Will I find myself losing again if I save in IDR? Now I understand that I should diversify,
    – stelle
    Sep 29, 2015 at 6:35
  • but how much should be in foreign equities? In what currencies should I make the investment? And could you suggest which websites that I can go to for professional help? (Again for quality reasons I don't want to rely on local 'professionals' for this kind of information, at least not 100%.) So once again, thank you, Dale & @rhaskett for sharing your insights with me.
    – stelle
    Sep 29, 2015 at 6:41
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    These are hard questions to answer as we would need lots of information about you and your goals. Also, there is sadly little work done from the point of view of people in smaller economies. The clear thing is that betting in currencies directly is too expensive and risky for individual investors. Getting your currency exposure from foreign equities is better. For websites I'd recommend Vanguard's articles, but i'd really recommend the book "A Random Walk Down Wall Street" as the best place to start.
    – rhaskett
    Sep 29, 2015 at 18:28

Currency speculation is a very risky investment strategy. But when you are looking for which currency to denote your savings in, looking at the unit value is quite pointless.

What is important is how stable the currency is in the long term. You certainly don't want a currency which is prone to inflation, because it means any savings denoted in that currency constantly lose purchasing power. Rather look for a currency which has a very low inflation rate or is even deflating.

Another important consideration is how easy it is to exchange between your local currency and the currency you want to own. A fortune in some exotic currency is worth nothing when no local bank will exchange it into your local currency. The big reserve currencies like US Dollar, Euro, Pound Sterling and Japanes yen are usually safe bets, but there are regional differences which can be easily converted and which can't. When the political relations between your country and the countries which manage these currencies is unstable, this might change over night.

To avoid these problems, rather invest into a diverse portfolio of commodities and/or stocks. The value of these kinds of investments will automatically adjust to inflation rate, so you won't need to worry about currency fluctuation.

  • Thank you Philipp for your wonderful explanation. Just one more question to make sure I understand it right, am I correct to conclude that I don't need to go into the trouble of buying stocks / mutual funds abroad (in USD / EUR / GBP) because a diverse portfolio of local stocks (in IDR) will be enough to mitigate currency fluctuation in the future? I get confused because what I understood was that when my home currency weakens, most local stock prices also suffer.
    – stelle
    Sep 29, 2015 at 7:00
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    @stelle When you mean with "local stock prices" the stock prices of local companies then that are two symptoms of the same problem: economic problems in a country usually result in both the currency inflating and the local companies losing value. The stock prices of internationally traded foreign companies should adjust with inflation of your local currency because they are traded internationally.
    – Philipp
    Sep 29, 2015 at 7:10

A currency that is strong right now is one that is expensive for you to buy. The perfect one would be a currency that is weak now but will get stronger; the worst currency is one that is strong today and gets weak. If a currency stays unchanged it doesn't matter whether it is weak or strong today as long as it doesn't get weaker / stronger. (While this advice is correct, it is useless for investing since you don't know which currencies will get weaker / stronger in the future).

Investing in your own currency means less risk. Your local prices are usually not affected by currency change. If you safe for retirement and want to retire in a foreign country, you might consider in that country's currency.


The best thing is to diversify across multiple currencies. USD and EUR seem reliable. But not 100% reliable to keep all your investments in this types of currencies. Invest part of your savings in USD, part - in EUR, and part in your home country's currency. Apart from investing I recommend you to have certain sum in cash and certain on your bank account.

  • Currency investment has a high degree of risk, because it is a zero sum game [money is earned or lost on the relative position of two currencies, even if total 'world buying power' goes up. Investing in multiple currencies long term likely only makes sense for someone with mixed-currency expenses. Ie if you want to retire in the US, then yes, investing in USD along the way might make sense for you. Sep 11, 2017 at 14:11

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