With the volatile Greek debt crisis raising concerns over the stability of the global financial system, finding the safest currencies to invest in has taken on a new sense of urgency.
As a type of safe-haven investment, the safest currencies are a place where you want to have at least some money when markets are unraveling and mainstay currencies like the euro are falling.
But how can an investor know which are the safest currencies?
And since the financial crisis of 2008, many central banks have gone to great lengths to devalue their currencies in an attempt to stimulate their economies. These "currency wars" have undermined the value of many of the world's major currencies.
The safest currencies tend to reside in stable nations with strong economies. The central bank of a nation with a safe currency should have a strong balance sheet, with more assets than liabilities.
The safest currencies also stand out whenever there is financial turmoil in the world. They're the ones that rise in value while less reliable currencies fall.
That sounds pretty clear, but there are anomalies.
The most obvious is the U.S. dollar, which many consider a safe-haven currency. Sure enough, the dollar tends to rise when there's trouble in the world. And the U.S. economy, the world's largest, is also among the most stable.
But the U.S. Federal Reserve, the central bank of the United States, raises questions about just how safe the dollar is in the long run. After several rounds of quantitative easing, the Fed has more than $4 trillion in U.S. Treasury debt and mortgage-backed securities on its balance sheet.
And of course, the U.S. government has a debt of $18.3 trillion. So while the U.S. dollar is better off than most other currencies, it's not necessarily the safest currency.
A true safe-haven currency should not have any of these vulnerabilities.
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.