Not all national currencies are created equal. Some have endured relatively intact over the course of the last 100 years, while others have been devalued into irrelevance. So what was the strongest currency of the 20th century?
Before we get to the answer, I think it is important to cover the methodologies I’ve used to produce my results. All performance is measured relative to the U.S. dollar, with the 1920s to very early 1930s as the starting point. All return calculations also take into account currency conversions and revaluations.
Reviewing a little bit of monetary history is also in order. The 1920s and early 1930s was the last time the gold standard was widely used by many nations. Although World War I (1914 – 1918) forced many European nations to temporarily abandon their currency pegs to gold, most reestablished some form of gold convertibility during the prosperous 1920s.
The Great Depression of the 1930s irrevocably changed gold’s relationship to money, however. As the global economic crisis deepened, nation after nation was forced to permanently suspend its currency’s gold convertibility. Great Britain, one of the leading economic and military powers of the time, abandoned the gold standard in 1931. The United States broke its traditional peg of $20.67 per troy ounce of gold in 1933. The last nation to surrender its gold standard in the face of the economic maelstrom was the Netherlands in late 1936.
Whatever impetus there may have been to reestablish national currency links to gold was permanently extinguished by the calamity of World War II. Instead, the monetary ecosystem was realigned around the (slightly devalued) U.S. dollar.
This was the venerable Bretton Woods system. Under this regime foreign currencies were pegged to the U.S. dollar, which was convertible into gold at $35 a troy ounce. The U.S. dollar was not a true gold standard during this time, though, as only foreign central banks could redeem their dollars for gold. Although the Bretton Woods system collapsed in 1971, it ushered in the dollar’s 70 year long (and counting) domination of the global monetary system.
But this leads us to our primary question. What was the world’s strongest currency over the last 100 odd years? Was any nation’s currency able to outperform the ubiquitous U.S. dollar during this period? Drum roll please!
And the answer is…the Swiss franc! Yes, the Swiss franc has been the strongest currency of the 20th century (and early 21st century) by far! Relative to the U.S. dollar, the Swiss franc has appreciated by some 425% between the 1920s and 2017. However, I should note that this performance was truly exceptional.
No other nation’s currency came close to being as strong as the Swiss franc. This, undoubtedly, is at least partially attributable to the fact that Swiss law required the franc to have a minimum 40% gold backing. This deference to the traditional gold standard was finally repealed by referendum in the year 2000.
The only other national currency that has been stronger than the U.S. dollar over the last century is the (now obsolete) Dutch guilder. The Netherlands has been respected for its prudent, level-headed monetary management for centuries. As a result, although not the strongest currency of the 20th century, the Dutch guilder appreciated against the U.S. dollar by about 22% between the 1920s and 2017. The Dutch guilder was retired as a currency unit by the introduction of the euro in 1999.
With the exception of the Swiss franc and Dutch guilder, the U.S. dollar has been the world’s strongest currency since the early 20th century. This is perhaps unsurprising considering the dollar’s excellent reputation for stability. In addition, the U.S. dollar enjoys nearly universal acceptance for settling international transactions. In my opinion, the U.S. dollar will continue to remain strong for the foreseeable future.
The British pound, on the other hand, has not held up nearly so well, depreciating by 74% versus the dollar. Great Britain’s former colonies are a mixed bag. The Australian dollar has lost some 69% of its value against the U.S. dollar since the 1920s. The South African rand has been a real laggard, depreciating by almost 97%. Only the Canadian dollar has done the Queen proud, devaluing by a mere 25% versus the U.S. dollar.
The Scandinavian countries deserve an honorable mention in the world’s strongest currency competition. The Danish krone (-46%), Norwegian krone (-56%) and Swedish krona (-57%) all only lost about half of their value versus the U.S. dollar. It isn’t easy keeping pace with the world’s reserve currency.
Not every currency can be in the running for the world’s strongest currency, though. Let’s instead take a look at how some of the other major nations’ currencies managed versus the dollar. And wow, do things turn ugly in a hurry.
The German mark was effectively wiped out twice during the 20th century. The first of these currency extinction events was the infamous Weimar republic hyperinflation of the early 1920s. A mere 20 years later, the German reichsmark collapsed in value at the end of World War II.
Life was also hard for anyone who dared to save in Russian rubles under the Soviet regime. The Soviet authorities orchestrated a steady succession of devaluations taking place in 1922, 1923, 1924, 1947, 1961 and 1991. Its successor state, the Russian Republic, maintained the tradition with a major currency collapse in 1998. Needless to say, the Russian ruble has depreciated by about 100% compared to the U.S. dollar over the course of the 20th century.
The Japanese yen, although one of the world’s most important currencies today, hasn’t fared so well against the dollar historically. Since the 1920s, the yen has lost about 98% of its value. Most of this decline occurred during and immediately following World War II. It seems the only thing worse for a nation’s currency than fighting an expensive war is losing one.
The French franc has also done rather poorly, losing around 96% of its value compared to the U.S. dollar since the 1920s. Mexico, on the other hand, only slightly lags the French in the world’s strongest currency race. The Mexican peso has plummeted by 99.99% versus the dollar, a hair’s breadth from joining the ignoble German mark and Russian ruble. And we won’t even talk about the atrocious Venezuelan bolivar, which, ironically, used to be the strongest of the Latin American currencies during the mid 20th century.
While it is easy to view these currencies’ performance as laughably inferior, it is actually more the norm than the exception. The U.S. dollar, in contrast, has been enormously resilient over the decades. Of course, these measurements are all relative.
In reality, all fiat currencies – including the U.S. dollar – are inappropriate vehicles for long term savings. As a point of comparison, since the 1920s silver has appreciated versus the U.S. dollar by over 2,800%. Gold did even better, outperforming the world’s third strongest currency by nearly 6,000%.
This is one of the reasons I advocate investing in tangible assets such as fine art and antiques. Unlike fiat currencies, which can be printed at the whim of corrupt or incompetent central bankers, rare and desirable art and antiques are strictly limited in supply. The Swiss franc, Dutch guilder and U.S. dollar may have been the world’s strongest currencies over the course of the 20th century, but they still pale in comparison to investment grade tangible assets.
