KWD (Kuwaiti Dinar)

What is the KWD (Kuwaiti Dinar)?

The Kuwaiti Dinar (KWD) is the national currency of the State of Kuwait. The dinar name derives from the Roman denarius. The KWD subdivides into 1000 fils which is a coin used in many Arab countries.

Kuwait is a small nation located between Iraq and Saudi Arabia on the Persian Gulf.

Key Takeaways

  • The Kuwaiti dinar (KWD) is the currency of the State of Kuwait, and as of 2019 is the most valuable currency on Earth.
  • The currency fluctuates in a relatively small range and is pegged to an undisclosed basket of currencies.

Understanding the KWD (Kuwaiti Dinar)

The British introduced the Indian rupee before it was replaced by the Gulf rupee in 1959.

Introduction of the Kuwaiti dinar (KWD) in 1961 was as a replacement for the Gulf rupee. The Gulf rupee was a currency pegged at parity to the Indian rupee. Issued in 1959 by the Indian government, the Gulf rupee was for use outside of India, particularly in the Persian Gulf region. Like the Indian rupee, the Gulf rupee was pegged to the British pound sterling (GBP). 

In 1961, Kuwait gained independence from the United Kingdom with the end of treaties put in place after the defeat of the Ottoman Empire. Kuwaiti Currency Law created the Kuwaiti Currency Board with the purpose of establishing a Kuwaiti currency. The Kuwaiti Currency Board introduced the Kuwaiti dinar as a replacement for the Gulf rupee. Until 1966, both currencies circulated, but the use of the rupee ended after its devaluation.

Between 1975 and 2003, the Kuwaiti dinar was pegged to a weighted currency basket. The content of the currency basket was mandated by the Kuwaiti Currency Board.

In 2003, the KWD was pegged to the US dollar (USD) at 0.29963 dinars to the dollar. This valuation continued until 2007 when it was formally re-pegged to an undisclosed basket of currencies. 

As of May 2019, the Kuwaiti dinar was worth about USD 3.29, making it the most valuable money on Earth.

Between 2016 and 2019 the currency was relatively stable, fluctuating between 3.27 and 3.36 USD.

The State of Kuwait has a petroleum product-based economy with more than 80% of government revenues coming from the oil industry. The State of Kuwait is a tax-free country, with one of the lowest unemployment rates in the world. The Kuwait Investment Authority (KIA) is the oldest sovereign wealth fund in the world, and the investment industry of the country manages more assets than any other member of the Gulf Cooperative Council (GCC), a regional economic and political union.

Issuance of the Kuwaiti Dinar

There have been six official issues of the Kuwaiti dinar banknotes since the first circulation in 1961. There have also been two commemorative sets circulated. 

The third series, released in 1980 upon the crowning of Emir Jaber al-Ahmad al-Jaber al-Sabah, was in use until Iraq invaded Kuwait in 1990. Upon invasion, the Iraqi government installed the Iraqi dinar as the official currency for the area. The invading Iraqi forces stole an enormous number of Kuwaiti dinar banknotes. With the liberation of Kuwait, the invalidation of the third dinar issue forced the replacement with the fourth issue of the currency in 1991.

The 1994 series implemented enhanced security features.

The sixth series came in 2014 with bills specially textured so blind and vision-impaired persons can identify them by touch.

Example of a Kuwaiti Dinar Exchange Rate

Between 2016 and 2019 the Kuwaiti dinar fluctuated between $3.27 and $3.36. That means that it cost between $3.27 and $3.36, US dollars, to buy one Kuwaiti dinar.

The higher rate, 3.36, means that the Kuwaiti dinar appreciated in value, or the US dollar had fallen in value relative to the dinar.

If the rate falls, that means that the Kuwaiti dinar is losing value, or that the US dollar is gaining value relative to it.

Due to its relatively low volatility, and limited global trade, the Kuwaiti dinar is not typically used as a speculative trading instrument. If it were, a trader would attempt to buy near the lower end of its historical range, and try to sell near the top of it. Buying at $3.27 and selling at $3.36—the price range over three years— represents only a 2.75% profit, less fees and commissions. This is why most traders and investors stay away from trading this currency unless they feel a major fundamental shift may be forthcoming which could cause a major shift in the value of the currency.