Hard and Soft Currencies

Paper Summary:

This paper explains what is meant by hard and soft currencies and then examines the countries in which these currencies are used. It explains that a soft currency is a less pejorative name for a weak or unstable currency. A hard currency is usually the major means of monetary exchange in a highly industrialized country, such as the United States, Japan, or the United Kingdom.

From the Paper:

"In a land of hard currency, such as Japan, Rodgers noted as he traveled, "there are no currency forms, no black markets, no devaluation or convertibility worries," unlike traveling in a developing nation, or establishing a financial contract between a hard currency and a soft currency nation. "There is nothing quite like a sound currency" because of its security," for both the tourist and the company seeking investment opportunities. (Rodgers, 2001) Even cheaper labor costs cannot always compensate for the added risk. And for dealers on the currency market, a strong stomach is required when trafficking in soft currencies. Rodgers admits that although, Japan seemed at first "almost dull compared to" Eastern Europe, Rodgers there was something to praised in the relief he felt, even though it lacked the investment thrill or high, when exchanging more of his dollars for yen as opposed to soft money. The black market presence, the sense that one could never know how much one might be worth from day to day was harrowing as a tourist, difficult as a personal investment seeker, and for a company dealing in millions, is often too much potential grief to bear, whatever the potential in profit."

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