Hard currency is any currency that is widely accepted for settling payment transactions. It has the following characteristics:
- The currency tends not to fluctuate much over the short term
- The currency is highly liquid in the foreign exchange market
These characteristics give companies confidence that hard currencies can be used to settle transactions without having to worry about unusual exchange rate fluctuations.
A hard currency generally originates in a country that has a robust economy and stable political environment. Examples of hard currencies are the U.S. dollar, British pound, European Euro, and Japanese yen.