What Is Hard Currency?


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Desperate for hard currency, Angolans are coming up with new ways to convert their kwanzas into dollars and euros. Latest estimations say that around 60,000 North Korean overseas workers raise up to $300 million annually in hard currency for North Korea regime. Venezuela’s hard currency income fell 60 percent in 2016 compared with the previous year, President Nicolas Maduro said on Sunday, blaming low oil prices. So why people around in crisis make hard currency such a big fuss?

Hard currency is a currency that is not likely to depreciate suddenly or to fluctuate greatly in value which means stable such as the Euro, US dollar, or Ye) or that enjoys the confidence of investors and traders alike. Hard currencies serve as means of payment settlements because they do not suffer from sharp exchange rate fluctuations. just be extremely liquid on foreign exchange, or forex (FX), markets. Nations with solid economic performances and highly stable political environments typically issue these. A typical means for determining how strong a hard currency actually revolves around the foreign exchange markets’ liquidity. There are eight global currencies which are considered to be by far and away the most heavily traded ones on earth. These are the U.S. dollar (USD), the euro (EUR), British pound sterling (GBP), the Japanese yen (JPY), the Swiss franc (CHF), the Canadian dollar (CAD), the Australian dollar (AUD), and the New Zealand dollar (NZD). Each of these proves to be hard currencies because of their massive liquidity amounts in forex markets. Sometimes the South African Rand (ZAR) is added to this list as a ninth hard currency. Yet neither the Chinese Renminbi nor the Indian rupee enjoys the status of hard currency. It goes to show how the stability of a country’s money supply and the policies of its central bank play into which currencies are considered to be hard and which are deemed less stable and less respected internationally. You can imagine how volatile the China and India economy.

Soft currency is a currency which is hypersensitive and fluctuates frequently. Such currencies react very sharply to the political or the economic situation of a country.

It is also known as weak currency due to its unstable nature. Such currencies mostly exist in developing countries with relatively unstable governments. Soft currencies cause high volatility in exchange rates as well, making them undesirable by foreign exchange dealers. These currencies are the least preferred for international trade or holding reserves. For instance in 2008 the economic mismanagement chaos created by Robert Mugabe forcing the central bank of Zimbabwe issued $100,000,000,000,000 notes during the last days of hyperinflation in 2009, and they barely paid for a loaf of bread. But their value has shot up skyrocketing.

Image credit: Market Business News.com

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