Hard and Soft Currencies

Paper Summary:

This document discusses the characteristics and attributes of hard and soft currencies. The paper identifies hard currencies as positive investment targets and are typically associated with stable economies and politically stable markets. The paper further discusses how soft currencies are most often associated with emerging markets and are typically avoided by investors because of their negative practices such as issuers often pegging such soft currencies to hard currencies which serves to destabilize world currency markets.

From the Paper:

"Hard and soft currencies as well as knowledge of them are vital in the global economy. How international currencies interact is a strategic consideration for corporate bodies with operations in more than one area, country, or region in matters such as hedging for risk or in repatriating revenues. A hard currency is typically referred to as the currency of a leading economy and one that is widely accepted in all markets as a common form of payment, such as the U.S. dollar, the Swiss franc or the British pound (Carrada-Bravo, 2003, p.17). Additionally, hard currencies, or currencies classified as hard in character are especially liquid on foreign exchange markets where they are actively traded. Another perspective of hard currencies is that they are normally associated with politically, economically, and socially stable countries (Laulajainen, 2003, p.44)."

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