Hard currency or strong currency is a currency whose exchange rate is compared to other medium and long term stable or rising currencies. Hard currencies are typically characterized by low inflation and full convertibility and fungibility ( interchangeability and easy comparison ). Contrary to it is a soft currency or weak currency . This is characterized by devaluation in the currency market (and usually higher inflation up to galloping or hyperinflation).
The hardness of a currency may fluctuate over time.
Hardness of a currency and currency coverage
A connection with a currency coverage (eg, gold standard) is not mandatory. Also backed currencies may be subject to inflation (eg price revolution) and do not necessarily have to be hard currencies. However, the introduction of cover, especially a currency Boardes are often a useful tool, the stability of the external value of a currency is to be improved, since the possibilities of inflation are low.
Accordingly, hard currency country identifies countries with hard currency. Hard-currency countries are preferred investment countries . Their economic policy is characterized by seeking monetary stability.
Examples of hard currencies
The euro is a strong currency. While the German Mark was always a hard currency , were Italian lira or French Franc during long periods soft currencies that were subject to a depreciation against the D-Mark . Another example of a hard currency is the Swiss franc .