What is Hard Currency?

Hard currency is any currency that is widely accepted for settling payment transactions. It tends not to fluctuate much over the short term, and it 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 that could cause them to incur unexpected losses.

Hard currencies are more valuable than the currencies of other countries. In some cases, a domestic currency is so weak that the country’s inhabitants will elect to convert their wealth into a hard currency, since it retains value better than their domestic currency. Some countries have even adopted a hard currency issued by another country as their official currency. For example, Ecuador, Bonaire, and Panama all use the U.S. dollar as their official currency.

Examples of Hard Currency

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, Swiss Franc, and Japanese yen.