College football playoffs are just around the corner.[i] By why limit playoffs to sports?

I now present to you the first International Currency Playoffs, to find the best currency of 2016.

There are 32 national currencies in these playoffs, from the 32 largest economies in the world. The winner of each currency-to-currency matchup depends on their exchange rates from January 1 to December 20, 2016.[ii] Whichever currency rose against the other wins the match.

You can see the results of the bracket here. Congrats to our champion, the Russian Ruble!


The Ruble trounced its first-round opponent, the Thai Baht, with a 17% gain over the course of the year. But it encountered a real scare in the second round against the Brazilian Real. A ruble was worth 0.05410 reals on January 1 and only 0.05465 on December 20. That’s a mere 1% rise over the course of the year.

Indeed, if the dates had been adjusted by just a few days either way, the Real would have won.

From then on, the Ruble maintained double-digit wins all the way to the top, handily defeating the New Taiwan Dollar (with a 15% rise), the Australian Dollar (18%), and in the final round, the Indonesian Rupiah (14%).

How did the American Dollar fare? After modest success in the early stages over European foes — an opening round victory over the Danish Krone (3.5%) and a second round triumph over the Swiss Franc (2.6%) — the greenback fell to a charging Canadian Dollar. $1 USD was worth $1.385 CAD at the start of the year and just $1.334 at the end, for a fall of 3.8%.

Overall, countries with a “dollar” currency — like Canada, the US, and Hong Kong — did very well. But is there an underlying reason for that pattern, or is that just a coincidence? I look forward to longtime dollar fans’ insights.

Southeast Asian currencies did far better than I’d expected. Half of the final eight currencies — Hong Kong, Indonesia, Philippines, and Taiwan — came from that portion of the world. Meanwhile, I would have expected Scandinavian currencies to fare better — alas, none of them made it past the second round.

Does the tightest policy win?

It’s also worth noting what is actually being rewarded here as we play off these currencies. I ran my currency bracket idea by Will Luther, a monetary economist at Kenyon College, and his immediate take was that this bracket simply crowns the tightest monetary policy over the last 12 months. The Bank of Russia’s current monetary policy is to achieve the goal of “reduc[ing] inflation to 4% by 2017 and maintain it within that range in the medium run.” Does that explain Russia’s win this year?

Inflation certainly plays a considerable role in exchange-rate determination — a focus on limiting inflation would seem to help the ruble against competing currencies. Economic growth plays a role as well; Russia’s economic contraction throughout much of the year aids in a stronger ruble.

Further, a one-year time period may not be sufficiently long to establish “champion currency” status. For certain, we can isolate a currency that rises over the course of the year against the rest — but that may be like isolating the stock with the biggest daily gain.

Finally, it should also be noted that the particular dates — from the beginning of the calendar year to the end — may have benefitted the ruble in particular. As mentioned above, the second-round matchup between the Brazilian Real and the Russian Ruble was exceedingly close.

One last bit: For all those opponents of state-controlled money, how would alternative monies fare in our competition?


The Ruble would have defeated gold with a 10% rise, though gold would have surpassed both the Indonesian Rupiah (3.7%) and the Australian Dollar (7.0%).


However! There is a savior from the Ruble, and it rests in Bitcoin. Everybody’s favorite cryptocurrency walloped even the Ruble by a titanic margin — 1 BTC was worth 31566 rubles in January and 48922 in December. That’s a rise of 55%. Long live the blockchain!

[i] For more on the strange economics of college football, read my recent article, “Let’s replace the college football selection committee — with math.” 

[ii]In some sports, the seeding (who plays who in the first round, the second round, and so on) may matter a great deal to the outcome.

But this is not true in contests with high transitivity. High transitivity means that if Team A beats Team B, and Team B had already beaten Team C, then Team A would almost certainly have beaten Team C as well.

The higher the transitivity, the more we can expect a playoff structure to distill a true best participant from a group. Amongst major sports, football is arguably the sport where the better teams win the highest percentage of the time. Whether that’s true or not is a good debate to have over drinks with friends, but baseball certainly falls short of football on this margin. As such, we would expect a football playoff to better distill a champion from a group of teams than would an identical baseball playoff (i.e., same number of teams, same one-game-per-round format).

Thanks to arbitrage, however, we can expect currency exchange rates to be awfully close to perfectly transitive. As such, if we simply pair off currencies to see which one rose against the other over the past twelve months, we should get a currency champion.

Furthermore, the stronger the transitivity, the less important seeding is to the process. Imagine an eight-number playoff to determine which of eight different numbers is largest. The order in which numbers are paired for this playoff is immaterial to the ultimate outcome. The same can be said for currencies.

So the Ruble (or, you might say, Bitcoin) is pretty clearly the true champion for 2016.