Hard currency and Soft currency


Hard currency—

Hard currency is very stable; it doesn’t change with the changes in the value related with the other currencies which we express as exchange rates.

It is the international currency in which the highest faith is shown.

It can be converted easily.

Its value cannot be depreciated.

Investors have confidence in investing with this hard currency.

It is a suitable currency for such a country where there is low inflation and the monetary and fiscal policies are sound.

It has high liquidity.

Some of the examples of hard currencies are—

[a] The United States Dollar

[b] Japanese Yen

[c] British Pound sterling

[d] Franc of France

[e] The euros of Europe

 

Soft currency—

Soft currency is unstable, unconvertible with other currencies.

It can be converted to other soft currencies of other countries but not against the hard currencies.

It is easily available in any economy in its forex market.

These soft currencies are not acceptable in the international business transactions.