FX.co ★ Afghani emerges as third best-performing currency

The afghani continues its bullish run. The Afghan national currency has recently emerged as one of the best-performing units in the world. Experts attribute its explosive rally to the active participation of Asian countries in the life of the war-ravaged country and foreign aid flows.

In late September, Bloomberg updated its ranking of the world’s fastest-growing currencies, with the afghani unexpectedly being among the top three. Afghanistan’s currency has added about 14% since the beginning of the year and is now third on the global list, trailing behind the currencies of Colombia and Sri Lanka. In the third quarter of 2023, the currency of one of the world’s poorest countries gained 9%, driven by billions of dollars in humanitarian aid and rising trade with Asian neighbors. Other factors contributing to a steep rise in the afghani included “banning the use of dollars and Pakistani rupees in local transactions and tightening restrictions on bringing greenbacks outside the country.”

The local foreign exchange market is moving toward the Middle Ages. Foreign exchange is now traded mostly by money changers, locally known as sarrafs. They put up stalls in markets or operate from shops in cities and villages. Thus, the open-air market in Kabul is now the financial hub of the country, with the equivalent of tens of millions of dollars crossing the hands of money changers every day.

Nevertheless, the afghani’s upside potential is limited. “The economic, social, and political instability will render this rise in the currency as a short-term phenomenon,” an expert said in a news report.